February Gold settles 1157.7 up $41.30 for the week of February 1st through February 5th
Gold futures reached its highest levels since October of 2015 as traders poured into the metals sector, as continued headwinds plague the economy both at home and abroad. Gold for the Comex session settled near unchanged, but in afternoon electronic trading on Friday, Gold traded up to a yearly high of 1175.0 basis April futures.
The surge was attributed to weakness in equities and large funds both extending their long positions, and some funds dumping shorts before heading home for the weekend. It is important to note that Gold’s fifty percent Fibonacci retracement for the January 2015 high of 1308.0 and the December 2015 low at 1046.4 comes in at approximately 1177.0. That level was almost achieved in Friday afternoon’s electronic session.
The next FIB number sits up at 1208.1 basis April futures. Friday’s session from start to finish was wild, as Gold traded to a daily low of 1145.5 shortly after Friday’s non-farm payroll number. U.S. non-farm payrolls rose by 151,000 in January, well below a Reuters poll forecast for a rise of 190,000 and down sharply from December, but hourly wages surged and the unemployment rate fell to an 8-year low, suggesting the labor market recovery remains on track.
The unemployment rate falling below 5 percent for the first time since 2008 buoyed the Greenback, but also brought back fears of a March interest rate hike. In my view, I still believe a March hike is still off the table; however stock indexes apparently don’t share that belief, as the stock indices sector suffered major losses with the tech heavy NASDAQ leading the way down over 3 percent on Friday.
Technically speaking with another upward extension in Gold amid uncertainty in the equity sector, Gold and Silver have benefitted from fresh interest as holdings of the SPDR Gold trust continue to rise. Also worth noting is the rise of both volume and open interest on this rally in the face of higher prices.
Upside targets come in as follows, with 1177.0 as the first target and then 1208.2, as that level represents the 61.8 percent retracement from the 52-week low. If that level gets taken out I would look for the yearly R1 at 1228.8 the next resistance level. To keep the trend intact 1137 needs to hold on the downside as that level represents the yearly pivot number.
While it is a relatively quiet week for economic data, analysts expect that U.S. dollar moves and Fed Rate hike expectations will continue to dominate the marketplace. The highlight of the week will be Fed Chair Janet Yellen’s two-day semi-annual testimony before Congress. She kicks off her testimony Wednesday before the House Financial Services Committee.
