Gold Under Pressure, ADP Nonfarm Payrolls Slides

Gold has posted slight losses on Wednesday, continuing the small downward movement which marked the Monday and Tuesday sessions. Gold is trading at a spot price of $1279.42 an ounce in the North American session.  On the release front, ADP Nonfarm Payrolls dropped sharply to 156 thousand, well short of the estimate of 205 thousand. ISM Non-Manufacturing PMI improved to 55.7 points, beating the estimate of 54.9 points. Crude Oil Inventories increased to 2.8 million barrels, much higher than the estimate of 0.6 million.

Gold posted strong gains last week, as the metal increased 4.8% in value. Gold briefly broke above the symbolic $1300 level on Monday and Tuesday, but the metal has posted slight losses this week. The Federal Reserve decision not to raise interest rates bolstered gold prices, and a soft US GDP reading helped push gold to higher levels. As well, weak global markets has meant that investors have less appetite for risk and have flocked to gold, a safe-haven asset.

ADP Nonfarm Payrolls was surprisingly soft in April, dropping to just 156 thousand. This was the weakest reading in over two years, and surprised the markets, which have grown accustomed to releases above the 200-thousand level. We’ll get a look at Unemployment Claims on Thursday and the all-important Nonfarm Payrolls on Friday. The employment picture has been a bright spot in the US economy, as unemployment remains at very low levels and Nonfarm Payrolls have been above the 200-thousand threshold. Despite the robust labor market, however, consumer confidence and spending has not kept pace. Last week, UoM Consumer Sentiment dipped to 89.0 points short of the estimate of 90.3 points. This also marked the fourth straight drop for the key indicator. Consumer spending is a key engine of economic activity, and softer numbers in the first quarter were an important reason that US GDP weakened in the first quarter, with a lukewarm reading of 0.5%.

XAU/USD Fundamentals

Wednesday (May 4)

  • 8:15 US ADP Nonfarm Employment Change. Estimate 205K. Actual 156K
  • 8:30 US Preliminary Nonfarm Productivity. Estimate -1.3%. Actual -1.0%
  • 8:30 US Preliminary Unit Labor Costs. Estimate 2.9%. Actual 4.1%
  • 8:30 US Trade Balance. Estimate -45.6B. Actual -40.4B
  • 9:45 US Final Services. Estimate 52.1. Actual 52.8
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 54.9. Actual 55.7
  • 10:00 US Factory Orders. Estimate 0.7%. Actual 1.1%
  • 10:30 US Crude Oil Inventories. Estimate 0.6M. Actual 2.8M

Upcoming Key Events

Thursday (May 5)

  • 8:30 US Unemployment Claims. Estimate 261K

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Wednesday, May 4, 2016

XAU/USD May 4 at 11:50 EDT

Open: 1286.90 Low: 1275.47 High: 1289.76 Close: 1279.42

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1232 1255 1279 1303 1324 1345
  • There is resistance at 1303
  • 1279 was tested earlier in support and could break in the North American session.
  • Current range: 1279 to 1303

Further levels in both directions:

  • Below: 1279, 1255 and 1232
  • Above: 1303, 1324, 1345

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement on Wednesday, as the ratio remains close to an even split between long and short positions. This is indicative of a lack of trader bias as to what direction XAU/USD will take next.

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.