XAU/USD – Gold Slips as US Nonfarm Payrolls Surges

Gold has posted losses on Friday, as the metal trades at a spot price of $1339.05 per ounce in the North American session. On the release front, US employment numbers in July were excellent, led by Nonfarm Employment Change, with a gain of 255 thousand. Average Hourly Earnings also improved, posting a gain of 0.3%.

Gold prices have fallen 1.6% on Friday, as the metal reacted to a stellar performance from Nonfarm Payrolls, one of the most important economic indicators. The payroll report surprised the markets with a huge gain of 255 thousand, crushing the estimate of 180 thousand. US wage growth also was positive, as Average Hourly Earnings gained 0.3%, edging above the forecast of 0.2%. This was the indicator’s strongest gain in three months. These strong numbers will likely increase the odds of a September rate hike by the Federal Reserve. The likelihood of a September hike dropped following a weak GDP report last week, and soft job numbers would have taken a September move off the table. With the impressive nonfarm payrolls report, additional signs of a strengthening economy could sway the Fed to press the rate trigger, so next week’s employment and retail sales reports will be under the market microscope.

On Thursday, the BOE made good on its word, lowering interest rates for the first time since 2009. The quarter-point cut has lowered the official bank rate from 0.50% to a historic low of 0.25%. The BoE has also expanded its asset-purchase program for the first time since July 2012, from GBP 375 billion to GBP 425 billion pounds. A rate cut had been widely expected, especially after the BoE surprised the markets in July when it did not make a move. Still the pound plunged after the announcement, losing some 220 points. The surprise Brexit vote in June, in which the British electorate voted to leave the European Union, shook the financial markets and the economic fallout, which is just beginning to be measured, is expected to be significant. The BoE is trying to cushion the repercussions of Brexit, and has cut rates and expanded asset purchases in an attempt to stabilize the economy and promote consumer confidence and spending. In making these moves, BoE Governor Mark Carney is showing that he “means business” and is willing to take significant monetary steps in order to right the listing British economy.

XAU/USD Fundamentals

Friday (August 5)

• 8:30 US Average Hourly Earnings. Estimate 0.2%. Actual 0.3%
• 8:30 US Non-Farm Employment Change. Estimate 180K. Actual 255K
• 8:30 US Unemployment Rate. Estimate 4.8%. Actual 4.9%
• 8:30 US Trade Balance. Estimate -42.1B. Actual -44.5B
• 15:00 US Consumer Credit. Estimate 15.5B

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Friday, August 5, 2016

XAU/USD August 5 at 11:10 EDT

Open: 1360.17 High: 1364.71 Low: 1336.60 Close: 1338.75

XAU/USD Technical

• XAU/USD was flat in the Asian and European sessions. The pair has posted sharp losses in the North American session
• There is resistance at 1361
• 1331 is providing support
• Current range: 1331 to 1361

Further levels in both directions:

• Below: 1331, 1307 and 1279
• Above: 1361, 1388, 1416 and 1447

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement on Friday. Long positions have a majority (55%), indicative of trader bias towards XAU/USD reversing directions 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.