This morning’s stronger than expected monthly payrolls report has sent the US dollar index soaring and gold tumbling:
US Dollar Index (December futures)
Gold (December futures)
Gold smashed through minor support around $1100 and now finds itself perilously close to making fresh 5+ year lows. The Summer low at $1072.30 isn’t of much significance aside from being the level at which the selling stopped after a $200+ decline during the first half of the year.
Looking at the monthly chart there is a significant layer of previous resistance dating back to 2008/2009 around the $980-$1000 area:
Somehow it seems logical that gold should have to fall back into the triple digits in order to shake out the last holdouts. This morning’s decline once again puts such a scenario very much in play. A 50% drop from the all-time high of $1923.70/oz would mean that price would need to reach $962.
While the technical damage incurred this week has been nothing short of catastrophic, gold is extremely oversold in the short term (down more than $100 in the last 8 trading sessions, down 8 straight and 15 of the last 17 days):
A couple of days consolidating in the $1080-$1100 area would work off some of the oversold condition and set up the next leg lower.