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Did More Jobs Ruin The Gold Trade?

Lawrence Lewitinn
Talking Numbers
Did More Jobs Ruin The Gold Trade?

Improved economic data coupled with higher interest rates have sunk gold prices. What next?

The good news for 195,000 Americans is that they have jobs. The better news is that if they want to buy themselves a congratulatory gold watch as a gift, it may be a little cheaper now.

Non-farm payrolls are up 195,000 this week, according to the US Department of Labor. That’s 30,000 more jobs than Wall Street expected. On that news, gold started to take a hit, dropping below $1,207 per ounce.

Meanwhile, as economic data improve, there’s less pressure on the Federal Reserve Bank to keep interest rates down. The Fed has been trying to do that by purchasing $85 billion per month in US Treasury and mortgages bonds. Fed Chairman Ben Bernanke recently indicated they may taper the program soon. With improved data, the Fed has less of a need to boost the money supply.

And that’s what is leading to lower gold prices today. If future prices are lower than what was initially anticipated, the need to hedge inflation with gold lessens, even if just a little bit.

Jonathan Krinsky, Chief Technical Market Analyst at Miller Tabak, thinks there are two technical levels on the downside to watch before gold can turn itself around. “If you get a move down to those levels,” says Krinsky, “that’s an area where you want to look at probably covering your shorts and potentially looking to get long.”

But don’t jump the gun yet, says Krinsky. “There’s still some more downside from here.”

Meanwhile, recently converted gold bull Abigail Doolittle, Technical Strategist at The Seaport Group, disagrees with Krinsky. She feels gold is trying to bottom out around here, and may swing up much higher.

What levels does Krinsky think the gold first needs to hit before reaching its bottom? And where does Doolittle think gold will go? Watch the video above to hear the two technical analysts on what’s next for gold.