Gold Outlook Undermined by Steller NFPs, Strong USD
Fundamental Forecast for Gold:Neutral
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Despite the ‘No’ vote on the Swiss Referendum, Gold prices are higher this week with the yellow metal rallying more than 1.9% to trade at $1189 ahead of the New York close on Friday. Gains early in the week were pared as improving US economic data and persistent strength in the greenback continued to pressure gold lower. Despite the late-week spill however, prices closed higher on the week with bullion looking to end the week just above near-term support.
The US Non-Farm Payrolls release on Friday spurred a steep sell-off in gold after the print topped consensus estimates with a blowout read of 321K and an upward revision of last month’s print to 236K. As a result, gold remains vulnerable to U.S. dollar strength on expectations that the Federal Reserve will be looking to move on interest rates amid the improving US economic outlook. Looking ahead to next week, traders will be eyeing US retail sales report and the University of Michigan Confidence survey for further guidance especially ahead of the FOMC interest rate decision on December 17. Another batch of positive U.S. data may heighten the bullish sentiment surrounding the greenback, which could continue to cap the near-term advance in bullion.
From a technical standpoint, Monday’s rally into $1220 completed a 100% extension off the November low and we’ll maintain more neutral stance heading into next week while noting a medium-term constructive outlook while above $1175/80. A move below this threshold leaves the trade vulnerable with subsequent support targets seen at $1165 and the December opening range low at 1142. A breach of the highs eyes objectives at $1237, $1248 and key resistance at $1262/68.
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