December Gold:  Open= 627.0  High= 631.3   Low=619.5   Close= 629.2   Change: +1.4

Friday morning opened with a surprising unemployment report, which showed a remarkable drop in the unemployment rate from 4.6% to 4.4%.  While October only added 92,000 jobs, below expectations, revisions of back months added the large increase in employment.  Certainly, the timing of the revision as skeptics with the elections only 4 days out but it remains unlikely that the report was ‘sexed’ up for political reasons.

Gold futures, the euro, and rates were hammered early once the report was released.  While rates and the euro remained pressed for most of the session, gold prices clawed back throughout the session.  What appeared to be a short term top and profit taking weakness turned into a solid test of the 200 day moving average at $619.  Dec futures bounced solidly off that level and traded most of the day in two sided action near the top of the range.

The jobs report calls into question economists predictions of slowing economic growth.  Could growth support metals in the long run?  If consumer and business spending doesn’t fall off then demand for physical commodities is likely to continue, which could keep inflation readings up.

It should be noted that gold prices have likely fallen to fair value zone at this time.  Supply and demand only have so much impact on this market, as we must remember gold as intrinsic ‘value’ or ‘worth’.  Gold dealers and consumers may balk at extreme prices but central banks and investors have other concerns.

Price action alone tells the story that gold became too cheap at $575.  It’s now time to see when gold becomes overvalued, and it’s likely to top out around $660 to $675. Until a stronger bull case can be woven together from disjointed threads, prices don’t have the support to press all time highs. 

Friday’s bounce off the lows was technically impressive and shows the strength of this market.  A pull back to $610 cannot be ruled out though but $640 looks to be hit first. Support comes in at $626, $620, $611. Resistance is seen at $630, $640, and $650. 

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