Gold Slips to Six-Week Lows as Markets Eye Nonfarm Payrolls

Gold prices are stable on Friday, but remain under pressure. The precious metal posted losses a day earlier and dropped below the 1280 line, its lowest level since June 19. In the European session, the spot price stands at $1283.96 an ounce. It’s a busy day on the release front, with three key events later in the day – Nonfarm Employment Change, Unemployment Rate and ISM Manufacturing PMI. We’ll also get a look at consumer confidence levels, with the release of UoM Consumer Sentiment.

On Thursday, Unemployment Claims came in at 302 thousand, higher than the previous release but very close to the estimate of 303 thousand. Earlier in the week, ADP Nonfarm Payrolls posted a sharp drop. If the official NFP release follows suit and misses the estimate of 234 thousand, gold could take advantage and regain some of Thursday’s losses. Meanwhile, US GDP exceeded expectations in the second quarter, as the economy expanded at an annual rate of 4.0%. This easily beat the estimate of 3.1% and marked the strongest quarter of economic growth since Q4 of 2009. The boost in economic activity was helped by strong consumer confidence and business investment, as well as solid employment data. The US dollar took advantage of the strong numbers, posting gains against its major rivals.

The Federal Reserve released a policy statement on Wednesday, with the Fed sounding somewhat dovish in tone. Policymakers acknowledged lower unemployment levels, but noted that “there remains significant underutilization of labor resources” in the economy. The Fed statement reinforces the view that the US central bank is in no rush to raise interest rates after the termination of QE, which is expected in October. As well, the Fed said that inflation levels have moved somewhat closer to the Fed’s target of 2.0%.

 

XAU/USD for Friday, August 1, 2014

XAU/USD August 1 at 8:50 GMT

XAU/USD 1283.96 H: 1285.61 L: 1282.31

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1240 1252 1275 1300 1315 1331

 

  • XAU/USD has steadied on Friday and is showing little movement in the Asian and European sessions.
  • On the upside, 1300 is an immediate resistance line. 1315 follows.
  • 1275 is providing weak support and could face strong pressure during the day. 1252 is stronger.
  • Current range: 1275 to 1300.

Further levels in both directions:

  • Below: 1275, 1252, 1240 and 1208
  • Above: 1300, 1315, 1331 and 1345

 

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in long positions on Friday, continuing in the direction seen a day earlier. This is a result of gold posting losses on Thursday, which led to short positions being covered, resulting in a larger percentage of open long positions. The ratio currently has a strong majority of long positions, indicative of trader bias towards gold prices recovering from recent losses and moving upwards.

 

XAU/USD Fundamentals

  • 12:30 US Nonfarm Employment Change. Estimate 231K.
  • 12:30 US Unemployment Rate. Estimate 6.1%.
  • 12:30 US Average Hourly Earnings. Estimate 0.2%.
  • 12:30 US Core PCE Price Index. Estimate 0.2%.
  • 12:30 US Personal Spending. Estimate 0.5%.
  • 12:30 US Personal Income. Estimate 0.4%.
  • 13:45 US Final Manufacturing PMI. Estimate 56.3 points.
  • 13:55 US Revised UoM Consumer Sentiment. Estimate 81.5 points.
  • 13:55 US Revised UoM Inflation Expectations.
  • 14:00 US ISM Manufacturing PMI. Estimate 56.1 points.
  • 14:00 US Construction Spending. Estimate 0.4%.
  • 14:00 US ISM Manufacturing Prices. Estimate 58.6 points.
  • All Day – US Total Vehicle Sales. Estimate 16.8M.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.