Gold: little change in reaction to economic data

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Just as the coronavirus crisis appears to have begun to subside and investors are well prepared for bleak economic data, Fed officials poured cold water on that optimism.

Philadelphia Fed President Patrick Harker, in an interview with CNBC, warned that reopening the economy prematurely would be a "health disaster" and hamper the recovery. Meanwhile, Minneapolis Fed President Neil Kashkari said he expects a long and gradual economic recovery, rather than a quick rebound. Their comments reinforce the view that loose monetary policy is likely to last for a certain period of time, which would be a huge plus for the precious metal.

While the strong US private jobs losses of $20.236 million in April, reported by the ADP on Wednesday, did not lift the price of gold, the latest initial jobless claims of 3.169 million yesterday, which showed a downward trend as shown in the chart above, The price of gold did not fall either. This may indicate that investors' interpretation of economic data has changed rapidly and their optimism about the outlook has now subsided.

From a technical point of view, spot gold is showing initial signs of a bullish breakout as seen on the hourly chart. It has broken above a symmetrical triangle pattern, while it is trading within a larger bullish flat pattern. Bulls may consider $1,697 as the nearest intraday support, and gold will need to break above the nearest resistance at $1,739 to open a path to the next resistance at $1,760. To the downside, a drop to $1,697 may indicate that prices may return to $1,682 and $1,661.

Gold: little change in reaction to economic data


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