Gold Jumps as Nonfarm Payrolls Plunge

Gold has climbed sharply in Friday’s North American session, as the pair trades at $1237.92 an ounce. In economic news, US Nonfarm Payrolls dropped to an astounding 35 thousand, well short of expectations. Average Hourly Earnings came in at 0.2%, matching the forecast. The unemployment rate dipped to 4.7%, beating the forecast. Later in the day, the US releases ISM Non-Manufacturing PMI. The markets are expecting the key services indicator to come in at 55.4 points.

It had been an uneventful week for gold, but that has dramatically changed on Friday, following the release of US Nonfarm Payrolls. This event is one of the most important indicators, and a dismal April report of just 38 thousand has stunned the markets. Analysts could be forgiven for rubbing their eyes in disbelief at this figure, which was the lowest reading since August 2010. The estimate stood at 159 thousand, which was almost identical to the previous release. The US dollar is taking a beating on the currency markets, and gold has also jumped on the bandwagon, climbing some $26, or 2.1% in the North American session. This release could have significant ramifications, and could mean that a June rate hike by the Federal Reserve is no longer on the table. A rate hike in July or September remains a possibility, but the markets will have to wait for the dust to settle from the NFP report before re-evaluating the odds of a rate move. Some of the plunge in the NFP release can be attributed to a strike by workers at Verizon, a major communications company. Still, even without this component, the indicator would have posted a gain of only 72,000, well short of expectations. In other employment news, Average Hourly Earnings, which measures wage growth, posted a weak gain of 0.2%. The unemployment rate fell to 4.7%, but workforce participation dropped to 62.6%. 

XAU/USD Fundamentals

Friday (June 3)

  • 8:30 US Average Hourly Earnings. Estimate 0.2%. Actual 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 159K. Actual 38K
  • 8:30 US Unemployment Rate. Estimate 4.9%. Actual 4.7%
  • 8:30 US Trade Balance. Estimate -41.2B. Actual -37.4B
  • 9:45 US Final Services PMI. Estimate 51.2. 
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 55.4
  • 10:00 US Factory Orders. Estimate 1.8%
  • 12:30 US FOMC Member Lael Brainard Speaks

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Friday, June 3, 2016

XAU/USD June 3 at 9:20 EDT

Open: 1208.02 Low: 1207.56 High: 1238.05 Close: 1237.92

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1191 1207 1232 1255 1279 1307
  • XAU/USD was flat in the Asian and European sessions. The pair has posted sharp gains in North American trade
  • 1232 has switched to support following strong gains by XAU/USD
  • There is resistance at 1255
  • Current range: 1232 to 1255

Further levels in both directions:

  • Below: 1232, 1207, 1191 and 1164
  • Above: 1255 and 1279 and 1307

OANDA’s Open Positions Ratio

XAU/USD ratio is showing strong gains for long positions on Friday. Long positions maintain a strong majority (74%), indicative of trader bias towards XAU/USD continuing to move to higher levels.

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.