Gold Dips Below $1200 on Sparkling Nonfarm Payrolls

Gold is stable on Monday, as the spot price is at $1194.13 per ounce in the European session. The metal dipped below $1200 following an excellent Nonfarm Payrolls report. It’s a quiet start to the week, with no US releases on Monday.

Gold prices dropped on Friday after strong US job numbers. Nonfarm Employment change rebounded in September, climbing to 248 thousand. This exceeded expectations of 216 thousand. The unemployment rate dipped to 5.9%, the first time it’s been below the 6% threshold in over six years. With QE slated to end later this month, the focus will shift to the timetable for an interest rake hike. Strong job numbers such as these could put pressure on the Fed to make an interest rate move sooner rather than later. This bodes well for the dollar but not for gold, as market perception of a hawkish Fed is bearish for the precious metal. Gold has dipped below support at $1200 for the first time since late December, and the downward spiral could continue.

At its October policy meeting, the ECB made no changes to interest rates. The central bank did announce it would start buying covered bonds in October and begin ABS purchases in Q4. However, there were no specifics and no mention of any purchase of government bonds. This left the markets underwhelmed by the ECB announcement and the euro remains at low levels. Given that the ECB shows no signs of introducing a full-blown QE, it’s questionable whether ABS will help boost the anemic Eurozone economy.

XAU/USD for Monday, October 6, 2014

XAU/USD October 6 at 10:10 GMT

XAU/USD 1194.49 H: 1196.00 L: 1183.13

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1136 1156 1186 1215 1240 1252

 

  • 1186 is an immediate support level. 1156 is next.
  • On the upside, 1215 has some breathing room as XAU/USD trades at lower levels.
  • Current range: 1186 to 1215.

Further levels in both directions:

  • Below: 1186, 1156, 1136 and 1101
  • Above: 1215, 1240, 1252, 1275 and 1300

 

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Monday. This is not consistent with the pair’s movement, as gold has posted slight gains. The ratio has a majority of long positions, indicative of trader sentiment in favor of gold moving higher against the dollar.

XAU/USD Fundamentals

  • There are no US releases on Monday.

*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.