Gold Holds Support as NFPs Disappoint- $1349 Remains Key Resistance
Fundamental Forecast for Gold: Neutral
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Gold prices were softer at the close of trade this week with the yellow metal sliding 1.5% to close at $1312 in New York on Friday. An event risk packed week saw bullion prices largely range bound as we headed into the highly anticipated non-farm payrolls report on Friday. But with the data disappointing consensus estimates, near-term the gold trade may remain supported as expectations for a September taper from the Fed are challenged.
The FOMC rate decision on Thursday offered little clarity with regards to the exit strategy, with the central bank sounding rather dovish this time around as they highlighted the risk for disinflation. The committee also stressed that rates are likely to remain low for some time after tapering has been completed with the statement noting that the central bank ‘reaffirmed’ its intention to keep its accommodative stance- a contrast from the ‘expects’ language used in previous statements. That being said, the broader impact on the greenback is likely to remain limited with near-term weakness to offer favorable longs in the USDOLLAR.
Friday’s NFP print proved beneficial for the yellow metal after the report disappointed with a print of just 162K, missing estimates calling for a read of 185K. Gold prices were probing below near-term support on Friday ahead of the read with the print fueling a rally back above the $1300 level as the U.S. Dollar came under pressure. Although the data missed, the headline unemployment rate did see and unexpected drop from 7.6% to 7.4%, topping estimates calling for a read of 7.5%, despite a slight drop in the civilian labor force.
With the bulk of key US economic data now out of the way, the docket will be rather light next week and traders will be closely eyeing remarks from FOMC members in the wake of this week’s NFP print. With Chicago Fed President Charles Evans – a voting member on the FOMC – scheduled to speak next week, comments from the central bank dove may further dampen the scope of seeing the Fed taper at the September 17-18 meeting and the committee may continue to delay its exit strategy in an effort to encourage a stronger recovery.
From a technical standpoint, gold’s dip below the interim support range at $1295- $1307 will constitute a false break if prices hold above the level on a daily close basis. This puts the near-term focus higher early next week but does not invalidate the broader downtrend. It’s also important to note that the daily RSI signature has now rebounded off the 50-threshold and the risk for a push higher in the near-term remains so long as prices stay above $1307. The key interim resistance range noted last week remains in play at $1334-$1349 with a breach above this mark risking a run on $1370. Only a breach and daily close above the 1393/97 pivot range would invalidate the longer-term trend while a break and close below support eyeing subsequent support targets at $1262/68, $1243 and $1215. Bottom line: topside in the near-term remains a risk with rallies into our key thresholds offering favorable short entries. -MB