Currency Analyst since 2010

Gold: trading after NFP

By Sergey Ruban

Investors are trying to estimate the impact of the latest US labor market data on the Fed’s future policy.

Last Friday the US Labor Department reported that the US economy added 217K jobs in May. The value was slightly better then the economists’ forecast who expected a growth of 210K. The strong employment report pointed to the continuing economic recovery and confirmed investors' expectations that the Fed would taper the stimulus program by the end of the year and then will raise the interest rates.

However, the report was not strong enough to significantly heat up the expectations for an earlier Fed’s monetary policy tightening, and thus to push the gold down. In addition, continued improvement in the labor market may increase inflation expectations causing some investors to look at gold as the hedge against the inflation risks.

The gold broke the lower limit of the trading range where it used to reside for a long time. After dropping to $1,240 per ounce, the metal began consolidating in the range between $1,250 and $1,240.

From a technical standpoint, the recovery may continue towards $1,265.00-$1,275.00, which previously acted as a support. However, this recovery reduces the oversold state of the metal and creates the basis for a new decrease to the level $1,200.00. This downtrend may start on the way to $1,265.00-$1,275.00.

At the same time, if the market breaks above $1,275.00, the growth is likely to continue to the $1,285.00-$1300.00 area where we also expect the trend reversal down. Only the consolidation above $1,300.00 will improve medium-term prospects of the metal, opening the way to the resistance $1,330.00.

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