Gold Hits 10-Month High as US Employment Numbers Disappoint

Gold has posted gains in the Friday session, continuing the upward movement we saw on Thursday. In the North American session, gold is trading at $1323.74, up 0.18% on the day. On the release front, US job numbers were unexpectedly soft. Nonfarm payrolls slowed to 156 thousand, well below the estimate of 180 thousand. Wage growth also disappointed, as Average Hourly Earnings posted a small gain of 0.1%, shy of the estimate of 0.2%.

Gold prices have enjoyed a strong week, gaining 1.9% this week. The metal showed some strong gains earlier on Friday, as the metal touched a daily high of $1329.05, its highest level since November 2016. These gains were triggered by the disappointing nonfarm payrolls and wage growth reports for August, both of which missed their estimates. Although the US labor market remains tight, investors are fretting about the lack of wage growth, which has contributed to the low inflation which continues to hamper the US economy. The Federal Reserve will also be dismayed by negligible wage growth, as a December rate hike is very much in doubt due to inflation levels which stubbornly remain well below the Fed’s inflation target of 2.0%. Currently, the likelihood of a December rate hike stands at just 36%.

Gold is traditionally considered a safe-haven asset, and often benefits when investors get jittery and lose their risk appetite. Such was the case this week, as renewed tensions between the US and North Korea early in the week propelled the metal above the symbolic $1300 level.  On Tuesday, North Korea fired a missile over Japanese territory, drawing sharp condemnations from Japan and the US, with President Trump declaring that “all options remain on the table”. Although, tensions have since eased somewhat, if North Korea decides to fire another missile towards Japan or the US military base on Guam, gold prices will likely move higher. As well, as the markets digest the disappointing job numbers, we could see risk appetite continue to wane early next week, which could extend the current gold rally.

US Jobs Report: More Bad News For Fed Hawks

XAU/USD Fundamentals

Friday (September 1)

• 8:30 US Average Hourly Earnings. Estimate 0.2%. Actual 0.1%
• 8:30 US Nonfarm Employment Change. Estimate 180K. Actual 156K
• 8:30 US Unemployment Rate. Estimate 4.3%. Actual 4.4%
• 10:00 US ISM Manufacturing PMI. Estimate 56.5
• 10:00 US Revised UoM Consumer Sentiment. Estimate 97.4

*All release times are GMT

*Key events are in bold

XAU/USD for Friday, September 1, 2017

XAU/USD September 1 at 9:15 EST

Open: 1321.37 High: 1329.05 Low: 1317.81 Close: 1323.74

XAU/USD Technical

• XAU/USD was flat in the Asian and European sessions. The pair has posted gains in North American trade
• 1307 is providing support
• 1337 is the next resistance line
• Current range: 1307 to 1337

Further levels in both directions:

• Below: 1307, 1285, 1260 and 1232
• Above: 1337, 1367 and 1392

OANDA’s Open Positions Ratio

XAU/USD ratio is almost unchanged in the Friday session. Currently, short positions have a slender majority, (52%), indicative of trader bias towards XAU/USD moving to higher ground. 

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