Gold Flat Ahead of US Job Reports

Gold is flat on Friday, trading at a spot price of $1107.96 per ounce in the European session. The markets are keeping a close watch on US employment data, as Nonfarm Payrolls and the unemployment rate will be released later on Friday.

Gold prices continue to fall, and the metal has now recorded daily drops over five consecutive days. In mid-October, gold prices were close to $1200, but have slumped close to 7 percent since then, as the $1100 level is now within striking distance. This slump in prices can be blamed on announcements from the ECB and the Federal Reserve. In the case of the ECB, it was a broad hint of further easing that sent gold lower. Last week, gold prices slipped as the Federal Reserve surprised the markets, stating that a rate hike in December was very much on the table. Investors snapped up US dollars after the ECB and Fed announcements, ditching gold holdings in the process. With the markets once again focused on a possible rate hike, the gold tailspin could continue, as increased speculation of a rate hike will likely send the greenback higher at the expense of gold.

The markets are awaiting US Nonfarm Payrolls, which will be released on Friday. NFP is expected to rise sharply to 181 thousand, so the dollar could be a big winner as we wrap up the trading week. However, the markets haven’t forgotten the dismal NFP report in September, which came in at 142 thousand, well short of the estimate of 201 thousand. Will the forecast for the October release be more accurate? Aside from employment numbers acting as an important gauge of the US economy, these releases have added significance, since strong job numbers will increase the likelihood of a rate hike in December. Conversely, a poor performance will damper expectations of a move by the Fed before 2016. Traders should be prepared for volatility after the Nonfarm Payrolls release.

On Thursday, US unemployment claims disappointed, as the key indicator jumped to 276 thousand, way above the forecast of 263 thousand. This marked a 5-week high. Still, recent jobless claim releases point to close to full employment in the US, and the four-week average of jobless claims, which is less volatile than the weekly release, remains at its lowest level since December 1973. The unemployment rate stands at just 5.1%, and is expected to nudge lower to an even 5.0%.

XAU/USD Fundamentals

Friday (Nov. 6)

• 13:30 US Average Hourly Earnings. Estimate 0.2%
• 13:30 US Nonfarm Employment Charge. Estimate 181K
• 13:30 US Unemployment Rate. Estimate 5.0%
• 20:00 US Consumer Credit. Estimate 17.6B
• 21:15 FOMC Member Lael Brainard Speaks

*Key releases are highlighted in bold

*All release times are GMT

XAU/USD for Friday, November 6, 2015

XAU/USD November 6 at 10:15 GMT

XAU/USD 1108 H: 1110 L: 1105

XAU/USD Technical

• XAU/USD has been flat in the Asian and European sessions.
• 1134 continues to provide resistance.
• 1098 is a weak support level.
• Current range: 1098 to 1134

Further levels in both directions:

• Below: 1098, 1080 and 1043
• Above: 1134, 1151, 1162 and 1180

OANDA’s Open Positions Ratio

XAU/USD ratio continues to point to movement towards long positions, which command a strong majority (73%). This is indicative of trader bias towards gold moving to higher levels.

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.