Gold falls as equities rebound dollar maintains strength ahead of NFP

The price of spot gold fell on Thursday for the second consecutive day and by the greatest percentage in a week as the US dollar continued to maintain its strength before Friday’s Non-Farm Payrolls report and as global equities staged a second day of gains.

This week’s losses for gold continue last week’s retreat from a rebound high around the 1170 resistance level. That high was the culmination of a two-week surge in mid-August that lifted the precious metal far above its July five-year low of 1077. The sharp surge was due to a combination of “safe haven” flows in reaction to recent equity market volatility, as well as short-covering after the price of gold stagnated in a prolonged consolidation near its lows from late July to early August.

With the US dollar continuing to assert its dominance ahead of key employment data and a potential Fed rate hike decision, and global equities having shown signs of regaining some semblance of stability, the persistent lack of demand for gold has continued to place pressure on prices.

Having dropped back down on Thursday to a low of 1121, right around its 50-day moving average, gold could likely have significantly further to fall, especially in the event that expectations of a Fed rate hike either in September or December this year prompt a further surge for the US dollar.

The closest major support level below the 50-day moving average is currently at 1110, which is the next major target immediately to the downside. Below 1110 is the key 1080 area, where the price of gold found strong support and a tentative bottom in late July and early August. On a longer-term basis, the primary downside objective is at the 1000 psychological level. Upside resistance currently continues to reside around the key 1142 support/resistance level.