Gold eked out a new high for the year early in the week at $1791.63, slightly exceeding the previous high at $1790.64 from February 29. Since Monday, the yellow metal has adopted a consolidative tone as investor attention quickly shifted to Friday’s non-farm payrolls report for September, leaving secondary resistance at $1802.89 (08-Nov-11 high) well protected for the time being.
NEW ALL TIME HIGHS SEEN AHEAD
While gold has achieved an important secondary objective, highlighted in my Triangle Breakout piece from August 29, there certainly doesn’t seem to be much serious selling interest up here. Yet the tentative nature of the upticks ahead of $1800 and the interspersed consolidations have already relieved the short-term overbought condition somewhat. Based on a measuring objective off the large triangle pattern, potential remains for new all-time highs in gold.
NEW HIGHS IN OTHER CURRENCIES
In fact, we’ve seen the yellow metal establish new record highs against both the euro and the Swiss franc this week, at EUR1386.42 and CHF1677.34 respectively. New multi-month highs were set against all of the major currencies, including solid gains versus the Australian dollar. Gold set a new high for the year at A$1742.76 after the RBA jumped back on the easing bandwagon with a 25 bps cut the Official Cash Rate, citing rising global (and specifically Chinese) growth concerns.
FRIDAY’S DATA
I’m not sure there’s any real advantage in waiting for the September non-farm payroll (NFP) results, as the Fed has made it pretty clear that even good data won’t lead them to back-off from their super-easy policy stance. Perhaps investors just want a better feel for what the Fed is really up against, with respect to deflationary pressures. NFP consensus is running around +111,000 jobs, and an uptick in the jobless rate to 8.2%.
That’s still a pretty soft jobs number with nearly four-years of quantitative easing already under our belts. I’m not sure why anyone thinks QE3 is going to garner different results, but with the Fed’s new-found emphasis on the “full employment” part of their dual mandate, I suppose you have to give it your best shot with the tools at your disposal…and that should continue to underpin gold for some time to come.
Update: Last week I suggested gold might play a little catch-up with silver in the weeks ahead, noting “The inability of the gold/silver ratio to sustain recent downticks below 51.” On Monday, the ratio pushed to a new six-month low at 50.31, but quickly snapped back to close above 51. It still appears to me like the ratio is trying to form a bottom.
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