XAU/USD – Gold Slide Continues, Nonfarm Payrolls Looms

Gold has posted considerable losses on Thursday. In North American trade, the metal is trading at a spot price of $1252.71 per ounce. On the release front, unemployment claims were excellent, dropping to 249 thousand, below the estimate of 255 thousand. On Friday, the US will release three key employment indicators – nonfarm employment change, average hourly earnings and the unemployment rate.

It continues to be a rough week for gold, which has slipped 4.9% and is trading just above the $1250 level. The metal is at its lowest level since the Brexit vote in late June, when gold prices surged following Britain’s surprise vote to leave the European Union. The sharp drop in gold prices has mirrored the spike in oil prices in the past week. A sharp jobless claims report has sent gold lower on Thursday, and with the US releasing nonfarm payrolls on Friday, traders can expect further fluctuation in gold prices in the Friday session.

After a disappointing ADP payroll report, US unemployment claims sparkled, dropping to just 249 thousand last week. Unemployment claims have come in below the forecast for 10 straight weeks, pointing to a tight labor market. Jobless filings have been below 300,000 for 83 straight weeks, marking the longest streak since 1970. With a December rate hike up in the air, Friday’s triple-release of US job numbers will be especially important. The markets are expecting some improvement in the September numbers. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings, which measures wage growth, is forecast to edge higher to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. If the markets are correct and September shows stronger numbers, the case for a Fed rate hike in December will have improved. If these releases are soft, however, the Fed might get cold feet and a rate hike could remain on hold until 2017.

XAU/USD Fundamentals

Thursday (October 6)

• 7:30 US Challenger Job Cuts. Actual -24.7%
• 8:30 US Unemployment Claims. Estimate 255K. Actual 249K
• 10:30 US Natural Gas Storage. Estimate 67B. Actual 80B

Upcoming Key Events 

Friday (October 7)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 171K
• 8:30 US Unemployment Rate. Estimate 4.9%

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Thursday, October 6, 2016

XAU/USD October 6 at 13:35 EDT

Open: 1269.11 High: 1269.29 Low: 1250.65 Close: 1252.71

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair has posted losses in the European and North American sessions
• 1245 is providing support
• There is resistance at 1279
• Current range: 1245 to 1279

Further levels in both directions:

• Below: 1245, 1223 and 1199
• Above: 1279, 1307 and 1331

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged in the Thursday session. Currently, long positions command a substantial majority (75%). This is indicative of trader bias towards XAU/USD reversing its downward movement and moving upwards.

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.