Gold Trades Heavy on NFP Beat- Bearish Below $1430
Fundamental Forecast for Gold: Bearish
- Crude Oil, Gold Prices May to Rise on Soft US Jobs Data
- Gold Prices Likely to Remain in Downtrend
- Gold Trades in Tiny Range at 5 and 20 Day Midpoints
Gold was softer this week with the precious metal off by 0.48% to trade at $1380 at the close of trade in New York on Friday. The gold trade has been uninspiring as of late with bullion holding a tight range in to the open of June trade but Friday’s highly anticipated NFP print however saw the range give way with prices breaking to fresh monthly lows on a stronger than expected print. Was today’s price action enough to refute the rally off the May lows? The dollar will tell.
Friday’s Non-farm payrolls print came in at 175K, topping estimates for a read of 163K with the unemployment rate unexpectedly rising to 7.6% from 7.5%. Despite the rise in the headline reading, it’s important to note that a 420K build in the civilian labor force fueled the uptick in unemployment as the participation rate rose to 63.4% from 63.3%. Note that the majority of declines seen in the unemployment rate since the start of the year have been largely attributed to broader contraction in the US labor pool with nearly 500K discouraged workers leaving the work force in March alone. As such, markets have interpreted this data as positive for the greenback with the Dow Jones FXCM USDOLLAR index recouping a small portion of the losses sustained earlier in the week at the expense of bullion.
Looking ahead to next week, investors will be closely eyeing data out of the US with retail sales, industrial production and the University of Michigan confidence survey on tap. Consensus estimates are calling for stronger prints on sales and production with the confidence widely expected to hold at 84.5. As US economic data continues to improve, demand for gold is likely to wane as the likely hood of Fed tapering reduces the threat of inflation. Look for gold to follow broader risk sentiment with moves in the greenback likely to have the largest impact on the yellow metal.
From a technical standpoint gold remains at risk with prices closing out the week just below the June opening range at the 50% retracement of the late May advance. Interim support now rests with the 61.8% Fibonacci retracement at $1370 with a break below key support at $1356 exposing objectives at $1340, $1331, and $1307. A breach above the monthly high at $1423 eyes a key resistance range between $1430- $1440, with only a break above invalidating our broader directional bias. –MB