Gold has once again fallen into a support region on the charts which continues to gain in importance as it is being tested yet again. The more it is tested, the greater the chance of it breaking for each test begins with the top side of the range moving lower, first from near $1400, then from just above $1320 and most recently from slightly above the $1300 level. Resistance is moving lower and lower but thus far the $1280 level has held.
Bulls have their backs up against the proverbial wall therefore as we head into tomorrow's big payrolls number report. Any strong number is going to break their backs. If the number comes in weak, they will have dodged a bullet yet once more.
Were it not for this report due out tomorrow, I do not believe $1280 would have held today. Bears are reluctant to press it further due to the volatile nature of these recent jobs reports. They do not want to take the chance of getting blindsided by another miserable number. Bulls however are in serious trouble if the number is strong as that will remove yet another leg of support under their already wobbly stool.
Out of all the economic data releases that regularly hit the market, these payroll reports are the most important and most illuminating. Ultimately the health of the economy depends more on the number of people working that anything else in my view. Given the Fed's rather optimistic reading of the economy in the FOMC statement yesterday ( remember, they blamed the weather for the poor showing ), anything that confirms an improvement on the labor front will be viewed as confirmation that the QE program is on track to be phased out entirely before this year is out.
In looking at the chart, note that gold has not yet had a CLOSE below $1280 since February. It has closed right at that level or just barely above it, but has always managed to bounce higher. A good part of this has been due to geopolitical concerns involving the Ukranian situation. While that factor remains in play, it seems to be fading from traders' minds as the turmoil looks to remain localized in that region ( for now ). That makes tomorrow's report all the more critical to gold's fortunes moving ahead.
Let's see what we will get.
Grains are weaker again today as those weather forecasts look much more conducive to planting prospects this weekend and into next week. Also, soybean export sales were terrible as the high prices appear to be doing their work at rationing demand. Funds are big longs in both the corn and beans so this will bear watching. Thus far they have been buying dips and keeping prices supported but if their computers shift into sell mode, watch out. Again, this has not yet happened however as the pattern of late has been for them to come charging back in just ahead of the closing bell. We'll see if that is the case today or not.
New crop December corn seems to have run into a temporary wall just shy of the $5.20 level. New crop November beans have done the same near $12.50.
Currencies are rather subdued today - again, I suspect this is due to the upcoming payrolls report tomorrow. No one wants to get too aggressive ahead of it.
Some good news, at least for consumers and some businesses, gasoline prices have fallen back below the $3.00 level wholesale. They have lost almost $0.20 over the last week. We should see a bit of relief showing up the pump shortly as a result.
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