Gold Slips Below $1100 After Super US Nonfarm Payrolls

Gold has posted small gains on Monday, following sharp losses on Friday after the US Nonfarm Payrolls report. In Monday’s European session, the gold spot price is at $1092.96 per ounce. In the US, there is just one event on the schedule. We’ll get another look at employment data, with the release of the US Labor Market Conditions Index.

It’s been a very rough ride for gold over the past several weeks. In mid-October, gold prices were close to $1200, but have slumped since then, dropping below the symbolic $1100 level. Gold took sharp hits after 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. Gold prices slipped further as the Federal Reserve surprised the markets with their October policy statement, hinting that a rate hike in December was very much on the table. The excellent Nonfarm Payrolls report on Friday will bolster the case of policymakers who favor a rate hike, and this means that the gold tailspin could continue.

US employment numbers have looked good in recent readings, but the outstanding Nonfarm Payroll report on Friday surprised the markets. The key indicator jumped to 271 thousand, crushing the forecast of 181 thousand. It was the indicator’s best showing since May. As well, hourly wages were up 0.4%, bringing the annual increase to 2.5%, and the unemployment rate dipped to 5.0%. These excellent readings are further signs that the US economy is close to full employment. Given that the Federal Reserve said in its recent policy statement that it employment data would be an important factor in a rate decision, the strong NFP reading has greatly increased the likelihood of a Fed hike. The effect on the markets was predictable, as gold dropped sharply after the release. Still, a Fed rate hike should not be considered a done deal, as not all US releases have been as strong as employment data, such as manufacturing and inflation numbers. Low inflation points to slack in the economy, and the Fed policymakers will need to be assured that the US economy can withstand a rate hike.

XAU/USD Fundamentals

Monday (Nov. 9)

• 15:00 US Labor Market Conditions Index

*Key releases are highlighted in bold

*All release times are GMT

XAU/USD for Monday, November 9, 2015

XAU/USD November 9 at 11:35 GMT

XAU/USD 1092 H: 1095 L: 1089

XAU/USD Technical

• XAU/USD posted small gains in the Asian session and has been flat in the European session.
• 1080 is a weak support level.
• 1098 has switched to a resistance role as gold posted sharp losses late last week.
• Current range: 1080 to 1098

Further levels in both directions:

• Below: 1080, 1043 and 1024
• Above: 1098, 1134, 1151 and 1162

OANDA’s Open Positions Ratio

XAU/USD ratio has showed strong movement towards long positions, which have a strong majority of positions (80%). This is consistent with the sharp losses by gold, which led to a large number of short positions being covered.

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.