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Gold Price Prediction – Prices Drop on Strong Payroll Report

David Becker

Gold prices tumbled lower on Wednesday as the dollar continued to drop and US yields moved higher. The rally in yields came after a much better than expected US ADP private payroll report that showed a much smaller drop than expected. The dollar has declined for a 7-straight trading session but the decline in the greenback has failed to lift the yellow metal. Generally, since gold is priced in dollars, a drop in the dollar equates to a rally in gold prices. The risk-on mentality continued to take hold, as stocks continued to soar. This has taken some of the safe-haven bid away from gold prices.

Technical analysis

Gold tumbled 1.8% and appears to have held support near the 50-day moving average at $1,694. A break of this level would lead to a test of the May lows at $1,682. Resistance is seen near the 10-day moving average at $1,722. Short term momentum is negative as the fast stochastic generated a crossover sell signal. Medium-term momentum is also negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices.

Payrolls Fall Less than Expected

US private payrolls fell another 2.76 million in May according to a report from ADP. This compares to expectations that payrolls would decline by 8.75 million. Job losses were especially deep in large businesses, which reported a decline of more than 1.6 million. Manufacturing took one of the biggest hits as the sector lost 719,000 workers. May’s decline also marked a precipitous drop-off from the 19.6 million plunges in April, an estimate that was revised from the initially reported 20.2 million.

This article was originally posted on FX Empire

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