Gold prices are under pressure early Monday, trading slightly below the 3 ½ month high it hit last week. The market is being pressured by concerns that the Fed will stick with its forecast for three rate hikes in 2018. This idea was supported last week with the release of the hawkish Fed minutes, upbeat economic data and Fed member commentary.
At 0842 GMT, February Comex Gold futures are trading $1317.30, down $5.00 or -0.38%.
The gold rally stalled late last week with the release of the minutes from the Fed’s December meeting. The central bank raised rates a quarter-point, with most FOMC officials backing the continued path of gradual rate hikes. According to the minutes, some Fed members were concerned about low inflation. Others thought the tight labor market and tax hikes could help boost inflation.
On Friday the U.S. Labor Department reported that the U.S. economy added a disappointing 148,000 jobs in December while the unemployment rate held at 4.1 percent. Economists were looking for non-farm payrolls to grow by 190,000. The total was well below the November pace of 252,000, which was revised up from the initially reported 228,000.
The bright spot in the U.S. December employment report was the rise in wage growth. Average hourly earnings rose 9 cents, or 0.3 percent, in December after gaining 0.1 percent in the prior month. This news lifted the annual increase in wages to 2.5 percent from 2.4 percent in November.
Additionally, hawkish comments from Cleveland Fed President Loretta Mester on Friday may be tipping the scales to the weak side for gold. Mester said the jobs report, which missed the estimates, was nevertheless “strong.” Mester also said she believes three to four interest rate hikes would be appropriate this year.
In other news, hedge funds and money managers raised their net long positions in COMEX gold in the week to January 2, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.
In the absence of bullish news on Monday, gold traders may be encouraged to start booking profits after its 16 session rally. The pressure may come from increased appetite for risky assets, rising Treasury yields and a stronger U.S. Dollar.
The current daily chart pattern suggests the market may be finding resistance at or near a Fibonacci level at $1317.10. A break under this level will be the first sign of selling pressure. This could lead to an acceleration into the 50% level at $1302.10.
Based on the current short-term range of $1238.30 to $1327.30, the best near-term downside target is $1282.80.
Today, investors will get the opportunity to react to speeches from FOMC Members Raphael Bostic and John Williams. They could break the gold market with hawkish commentary.