Market Reaction
Market participants used the jobs report to actively engage in U.S. equities taking all three major indices higher. The Dow Jones industrial average gained 1.65%. The Standard & Poor’s 500 gained 1.85%, and the NASDAQ composite gained 2.25% in active trading today.
Gold Prices Drop as Investors Take Profit Despite Strong Fundamentals
Gold investors and traders also used this report as a reason to pull profits from recent gains in gold which had roughly a $100 trading range from Tuesday’s open at $1990 to yesterday’s high of $2083. Before the upside breakout in gold which occurred on Tuesday, May 2 gold pricing was contained in a narrow trading range between $1980 and $2020.
Technically speaking gold traded through a series of lower highs and strong support at $1980. This created an asymmetrical triangle pattern composed of a descending top and a flat bottom. Typically, this type of asymmetrical triangle occurs during a price correction and once pricing reaches the apex of the triangle market technicians look for a break to lower pricing. In rare instances, this pattern can be found during an uptrend as witnessed this week in gold.
Considering that the major fundamental factors that have moved gold substantially higher are still unresolved and worrisome today’s strong decline in gold prices could present an opportunity to buy the dip. There is still common ground that both Democrats and Republicans can sign off on as we get closer and closer to the date at which the government can no longer meet its obligations. Whether or not there are more midsize regional banks that could become insolvent is unknown. Combined these issues could certainly continue to be highly supportive of gold prices moving them higher.
However, gold enthusiasts got a reprieve today as gold futures dropped $30.80 or 1.5% with the most active June 2023 Comex contract currently fixed at $2024.90.
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Wishing you as always good trading,
Gary S. Wagner
amp.fxempire.com