At $1,180, the price of Gold tested a major support level last week based on the weekly chart. However, a look at the daily chart suggests that the price of the yellow metal could still fall further in the coming days. In fact following the release of the nonfarm payrolls, the price of the yellow metal is now down to $1,168 and still looks set to fall even below that level. Analysts are already predicting a new multi-year low fro the price of gold, which could come next week.

What exactly is affecting the price of gold?

Up until now, it is not very clear as to what is affecting the price of Gold and other commodities. There are several theories out there that suggest different things. First, it’s about the strengthening U.S. Dollar, which some analysts view as a major driving factor. However, in my opinion, the gains made by the USD, as estimated via ExchangeCurrency.Com against various currencies cannot be directly mapped to the decline in the price of gold.

Nonetheless, I cannot dispute their claim much, because in essence, the price of Gold declines as the USD gets stronger.  The same applies to Oil and other commodities, whose base currency is the USD.

There is also another school of thought that is convinced that the price of gold is suffering from a decline in demand as several global economies continue to slow. Additionally, India, the world’s largest consumer of the metal retracted on a decision to lower import duty on gold thereby hurting demand for the commodity. This sent the price of gold plunging.

The price of Gold, weekly chart

Based on the weekly chart, the price of gold appears to have reached a major support zone at $1,180 to $1,200, and looks as if it could rebound in the next few weeks and aim at R1 at $1,240 and R2 at $1,280. However, based on the daily chart, the price of the precious yellow metal could tumble further.

The price of Gold, daily chart

The daily chart seems to suggest that there could be further downside in the price of gold, with the potential of hitting a low of $1,160 next week. However, analysts believe that the U.S nonfarm payrolls data could give the price of gold a hand up depending how the market interprets it.

Nonetheless, in case of any rebound, the initial target is at $1,200, and then $1,220 and $1,240 respectively based on the daily chart.

The nonfarm payrolls

On Friday March 6 in the morning, the U.S bureau of labor statistics released the February nonfarm payrolls which showed a massive decline in the unemployment rate and massive increase in the jobs numbers.

The unemployment rate declined from 5.7% in January to 5.5% in February, while the number of new jobs created during the month came at 295,000. This compared to analyst (polled by Bloomberg) estimate of 5.6% unemployment rate and 235,000 in nonfarm payrolls.

However, it was a disappointment in the hourly wage as the rate increased by 0.1% compared to analyst estimate of 0.2% from the month of January, and 2% year over year, compared to an estimate of 2.1%.

So what does this mean for the price of gold?

Tentatively, this means that the price of gold could continue to fall in the near terms simply because the numbers released offer more positives with regard to the U.S economy than negatives and hence this should help boost investor optimism in the equities markets.

Additionally, over the last few quarters, a stronger U.S economy has tramped the price of gold and there is no real reason why this should change now.

Conclusion

The price of gold appears well set for further decline, especially after the February nonfarm payrolls and India’s decision to retract on lowering import duty on the yellow metal.

Nonetheless, there is more room going up than down, and hence rebound could see significant gains in the price of gold, which mean, as long as the price of the yellow metal is below $1,200, now could be a good time to buy.