Gold plummet nears multi year lows

In the aftermath of this past Friday’s US jobs data that came out much better than expected at 271,000 added jobs versus a prior consensus forecast of 181,000, gold predictably extended its precipitous tumble of the past three weeks.

The precious metal’s recent losing streak has been sharp and virtually unrelenting as market anticipation over a potential December rate hike in the U.S. has grown as a result of somewhat hawkish Fed comments and relatively buoyant economic data. Friday’s substantially positive US non-farm payrolls report further supported the case for a rate hike next month.

During the course of the past three weeks, the price of gold has broken down below several key support factors, including: its 200-day moving average, its 50-day moving average, the $1140 support area, an uptrend channel extending back to this past summer’s lows around $1080 and, most recently, the key $1100 psychological support level.

Even after breaking down below all of these major support factors, gold’s stance and outlook continue to remain moderately bearish as we move towards the Fed’s crucial meeting next month.

Currently trading not far above the five-year low of $1077 that was just set this past July, price is nearing a critical support juncture. A generally rising US dollar and the specter of rising US interest rates should continue to weigh on the precious metal, at least until the December Fed meeting.

If this pressure results in a breakdown below the $1080 support level and this past July’s noted $1077 low, the price of gold could potentially follow-through with a further drop towards the $1050 target objective. This level is also around the 161.8% Fibonacci extension of the last bullish run within the noted uptrend channel.