A big week with the FOMC meeting and jobs report for October
Traders andinvestors are waiting for two key events this week that will shape thedirection and price of gold. The first event will begin tomorrow and concludeon Wednesday when the Federal Reserve convenes and concludes its November FOMCmeeting. This will be followed by the Fed's monetary policy statement whichwill contain any changes, as well as a press conference by Chairman Powellapproximately 1/2 hour after the conclusion of their November meeting.
It is highlyexpected that the Federal Reserve will announce the onset the tapering of theirasset purchases of $120 billion monthly. During the last FOMC meeting, the Fedrevealed that they will taper purchases by $15 billion each month.
Currently,the Fed has been accumulating assets split between U.S. bonds and notes ($80B),and mortgage-backed securities ($40B). Once tapering begins they will reducetheir purchases of U.S. debt by $10 billion each month, as well as reduce theirassets of MBS by $5 billion each month. This means that their tapering willlast a total of eight months.
However, theFed has not addressed reducing their balance sheet, all tapering does is reducetheir asset purchases. During the last recession of 2009, the Federal Reserve'sasset sheet swelled to $4.5 trillion. They also reduced their asset balancesheet from $4.5 trillion to $3.7 trillion, until the Fed perceived furtherreductions would have a detrimental effect on the economy. Over the last yearand a half, the Fed has been aggressively adding to their balance sheet whichhas now more than doubled to $8.6 trillion.
It is alsobelieved that the Federal Reserve will not begin lift-off until they have endedthe tapering process which will most likely occur in June or July.
The secondkey event will occur on Friday when the U.S. Labor Department releases its nonfarmpayroll jobs report for October. The September jobs report came in well belowexpectations and predictions by economists polled by the Wall Street Journal.The forecast for last month's jobs report was that it would result in anadditional 450,000 Americans being employed by nonfarm payroll jobs. However,the actual numbers came in at a tepid 194,000 jobs added, clearly showing theimpact of the Covid 19 Delta variant and labor market shortages.
The currentforecast for November's jobs report is that an additional 450,000 new jobs willhave been added in October. However, the forecasts have come in well belowexpectations over the last two months. In September the U.S. Labor Departmentreported that there were an additional 317,000 new jobs added, below theBloomberg poll of economists which came in expecting 400,000.
As of 5:40 PMEDT gold futures basis, the most active December 2021 contract is fixed at$1794.60, after factoring in today's $10.70 gain. On a technical basis, thefirst level of resistance is at $1800 per ounce.
Afterbreaking above that key psychological level, it was reported that large hedgefunds shorted gold futures moving gold back below $1800, to hit an intraday lowon Friday of $1772. Today gold opened at $1785.30, traded to a low of $1780.20,and recovered to current pricing about six dollars shy of $1800. Above $1800the next level of resistance occurs at $1836 which corresponds to the highsachieved at the beginning of September. Current support levels begin at the 50-daymoving average which is currently fixed at $1782, followed by Friday's low of$1772. Major support for gold is at $1748 and $1720.
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Wishingyou, as always, good trading and good health,
By Gary WagnerContributing tokitco.com
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gary@thegoldforecast.comwww.thegoldforecast.com