RJO Futures senior market strategist Phillip Streible cautions savvy investors that gold is approaching a crossroads, and the price could swing either way.
"If we see a big miss in the jobs report, followed by a more hostile situation in North Korea and further unwinding of the EU, then gold could see a complete turnaround and threaten $1,300," Streible wrote, CNBC reported. "If things subside and stabilize, economic data remains firm, then $1,200 is the likely target. Either way, gold is walking on a tight rope," he wrote.
Gold fell to a one-month low as the dollar firmed on Wednesday, after the U.S. Federal Reserve kept interest rates unchanged as expected and the market reduced expectations of a surprise win by France's far-right presidential candidate.
The Fed concluded its two-day meeting with a bullish statement that downplayed weak first-quarter economic growth, said inflation has been "running close" to its target, and emphasized the strength of the labor market, in a sign it could tighten monetary policy as early as June.
Spot gold was down 0.8 percent at $1,246.76 an ounce by 2:58 p.m. EDT (1858 GMT), after falling below the 50-day and 200-day moving averages and touching its lowest since April 5 at $1,244.93, Reuters reported.
U.S. gold futures settled down 0.7 percent at $1,248.50.
"The Fed's apparent comfort with the first-quarter slowdown and its sanguine outlook has pressured gold back to day's lows as the narrative of two more rate hikes this year remains robust," Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York, told Reuters.
"Gold breaking down below the 50- and 200-day moving averages today suggests that further short term losses may be likely."
As well as reducing demand for non-interest bearing gold, higher rates would make the dollar-denominated metal more expensive for buyers paying with other currencies.
Traders are pricing in a 70 percent chance of a June rate increase, according to the CME Group's FedWatch Tool.
"Attention will now turn to Friday's payrolls to get the ball rolling on that front," said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto.
To be sure, several fundamental factors are working against the price of gold, said Gina Sanchez, CEO of Chantico Global, CNBC reported.
"I think the long-term trends are against it, but there are some short-term places for gold to still continue to be in a portfolio right now," Sanchez told CNBC.
"We have an economy that is recovering, we're going into an interest rate-hiking cycle, volatility has been very low, and the dollar has been strengthening," Sanchez said. "So all of those things are stacking up" and pushing the yellow metal's price down instead of boosting it.”
Meanwhile, as the earnings season wraps up for North American gold miners, the biggest surprise has been out-sized market reactions, with Kinross Gold Corp. surging the most in almost a year and Barrick Gold Corp. tumbling.
Barrick, the world’s biggest bullion producer, lost 11 percent on April 25 in more than double average trading volume after missing analysts’ estimates for only the second time in seven quarters, Bloomberg reported. The last time Barrick had such a sizable earnings disappointment, in the first first quarter of 2015, its shares rose the next day in average volume.
Kinross soared as much as 17 percent in heavy volume on a one-cent earnings beat, while fellow Toronto-based miner Agnico Eagle Mines Ltd. jumped 11 percent on April 28, the day after its street-beating results. Agnico-Eagle edged out Kinross for the biggest beat over analysts expectations in percentage terms -- 189 percent higher than estimates.
“We’ve seen just huge moves,” Josh Wolfson, an analyst with Eight Capital, told Bloomberg. “Generally the market has reacted with larger-than-expected movement.”
(Newsmax wires services contributed to this report).
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