TD Securities outlines three possible scenarios for gold in the near term, depending on the monthly U.S. jobs report.
The “good” for gold would be if U.S. employment numbers disappoint, coming in materially below the current whisper number of 125,000 to 150,000 (after the positive ADP and jobless claims reports Thursday).
“In this case, investors materially increase the likelihood the Fed does QE3 near term, which could very well see gold break out of its recent $1,535-$1,640/oz range and head into $1,700/oz territory,” TDS added.
“The bad: we see U.S. employment come in as expected, with more Fed accommodation coming at some point, but certainly not imminently. This would likely force gold down towards $1,580/oz, which is associated with a 23.6% Fib support level,” they added.
“The ugly: there is a big beat on the employment front, materially over 150k (say near 200k). Markets take QE3 off the radar screen until new data shows the U.S. economy is sharply deteriorating. In this situation, gold could very well test mid-May lows of $1,535/oz and look down towards $1,490/oz as the next big stop.” Longer term, TDS looks for gold to move higher due to a rising probability.