Gold price in rally mode on latest geopolitical tensions, but Friday jobs report could disrupt momentum – analysts

(Kitco News) Gold rose above the coveted $1,800 an ounce on Thursday due to heightened geopolitical tensions between the United States and China. But Friday’s next jobs report could disrupt the momentum, analysts said.

December gold futures rose $33 on Thursday, hitting a daily high of $1,812. As of this writing, prices are at $1,808.20 per ounce.

Taiwan is at the center of the latest round of geopolitical tensions between the United States and China. On Thursday, markets were spooked by China’s firing of several ballistic missiles around Taiwan in retaliation for a visit by US House Speaker Nancy Pelosi. China is also carrying out aggressive military maneuvers.

“The aggressive tone emanating from Beijing in response to Pelosi’s visit to Taiwan has made for a classic safe-haven play in recent sessions, with gold and Treasuries rising in tandem with the US dollar and Japanese yen” , said Han Tan, head of the market. analyst at Exinity Group.

This situation will continue to develop over the weekend, according to Marc Chandler, chief market strategist at Bannockburn Global Forex.

“China continues its military harassment of Taiwan, while US President Biden opposes a Senate bill that would recognize Taiwan as a ‘non-NATO ally’ and boost its representation in international forums,” Chandler said.

To learn more about geopolitical tensions and their impact on gold, click here.

It was an encouraging rally for gold after a stronger US dollar triggered a selloff at $1,700 an ounce in July. On a technical basis, a close above $1,789 would be a solid sign of further gains to come, according to TD Securities strategists. “We believe that prices closing above $1,789 per ounce would be enough catalyst for a change in momentum,” they said on Thursday.

However, the big hurdle is Friday’s July US jobs report. strategists added.

Consensus calls from economists expect the economy to add 250,000 new jobs in July after adding 372,000 in June.

Belligerent speakers at the Fed also helped push gold prices higher this week by opposing the idea of ​​the US central bank forgoing rate hikes.

“One after another they have stuck to the script that has been set. What we are seeing is a coordinated and well-designed communications effort from the Fed. It is supposed to leave no doubt as to the Fed’s intention to keep rates rising until inflation falls, regardless of the cost to growth and jobs,” said Win Thin, head of global currency strategy at BBH.

Based on the latest comments, Chicago Fed President Charles Evans said the US central bank would likely continue to use oversized rate hikes until it sees inflation come down. “If you really thought things weren’t getting better… 50 (basis points) is a reasonable estimate, but 75 could also be fine. I doubt more is needed,” he told reporters on Tuesday. .

San Francisco Fed President Mary Daly also said inflation remained a problem. The Fed has “a long way to go” before achieving its price stability goals, Daily said in a LinkedIn interview. “We are still resolute and completely united,” she said.

St. Louis Federal Reserve Chairman James Bullard noted that “we still have some way to go here to get to tight monetary policy.”

On top of that, Richmond Federal Reserve Chairman Thomas Barkin admitted that the Fed was willing to pay the price to get inflation under control. “There is a way to get inflation under control. But a recession could come in the process. If that’s the case, we have to keep that in perspective: nobody canceled the business cycle,” he said. .

24 hour live gold chart [Kitco Inc.]

What future for gold?

Gold is looking to resume its rally after peaking above $2,000 an ounce in March, according to a growing number of analysts.

“Gold looks most likely to resume its sustainable upward trajectory and breakout resistance at around $2,000 an ounce against support below $1,700,” said Mike McGlone, senior commodity strategist at Bloomberg Intelligence. . “The most aggressive Fed tightening in 2022 since the 1980s has contained gold, and it is only a matter of time before rate hikes subside, leaving the metal to resume its trajectory of less upside resistance.

CNBC’s Jim Cramer also updated his outlook on gold this week, saying now was the perfect time to get into gold trading after what he described as a “weird time” for precious metals.

Cramer quoted legendary market technician Larry Williams’ chart analysis: “Williams finds that when small speculators get too bullish, it’s almost always a sign that we’re close to a top. But when they get too bearish, it’s almost always a sign that we have a bottom on our hands,” Cramer explained. “According to the latest Commitment of Traders report, small speculators are net long 92,690 contracts for gold, which is their most small long position since May 2019, just before we had a major increase in gold.”

Cramer’s own view is not to bet against Williams when it comes to spotting a dip in gold. “The charts suggest that gold may be ready to rebound, and now may be the perfect time to buy,” he reiterated.

Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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