Gold’s Jobs Nightmare

A customer examines a selection of gold bars from Swiss manufacturer Argor Hebaeus SA.
Akos Stiller | Bloomberg | Getty Images
A customer examines a selection of gold bars from Swiss manufacturer Argor Hebaeus SA.

The economy just got some great news, and gold hates it.

The U.S. economy added 195,000 jobs in June, easily besting the 165,000 consensus estimate. As soon as it heard the news, gold tanked $26, dropping to the lowest level in a week. But why?

"Gold hates any good U.S. data at this stage," said Kathy Lien of BK Asset Management, "because any kind of good news is driving the dollar sharply higher, and gold is just being punished as a result."

(Read More: Job Growth Posts Large Gain in June; Rate Holds)

For Lien, the Federal Reserve's tapering plans remain the market's main focus. And she believes that today's number "overall reinforces the idea that the data is good enough to taper in September."

(Read More: Why Fed May Hike Sooner Than You Think)

That is certainly what the bond market seems to imply. Yields are rising as traders expect that the Fed is now getting the economic signals it needs to exit the bond market shortly. And as yields rise, gold looks like a worse and worse investment, because its zero percent yield looks increasingly meager when compared to the yield of Treasury notes.

(Read More: Why Higher US Yields Should Cheer Investors)

As George Gero, gold analyst at RBC, wrote in a note: "Bond yields jumped higher," which makes for "strong dollar and weak metals."

Rich Ilczyszyn, iiTrader CEO and CNBC "Futures Now" contributor, can't find good news for gold anywhere he looks. Off of the payrolls data, "equities are higher and the dollar is soaring—this all provides headwinds for gold," Ilczysyzn told "And with higher dollar, higher rates and higher equities, that's the nail in the coffin for gold. There's just no way for the market to rally here."

So how low can gold go? "$1,200 is the key level for gold," said Lien, "and with the latest push higher in the dollar, this week and the following is when we'll have the opportunity for gold to break below $1,200."

Ilczyszyn is even more bearish. "We would project $1,000," he said. In terms of short-term trading, "if we close below $1,180, we'll go $100 lower."

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.

Watch "Futures Now" Tuesdays and Thursdays 1 p.m. EDT exclusively on!

Like us on Facebook!

Follow us on Twitter! @CNBCFuturesNow.


Host Bio & Watch Now

Trader Bios