Gold Remains High After Soft NFP, Terror Attack in London

Gold prices have paused on Monday, after gains of 1 percent on Friday. In the North American session, spot gold is trading at $1280.32 per ounce. On the release front, today’s key indicator was ISM Non-Manufacturing PMI. The index pointed to a slowdown in the services sector, dropping to 56.9 points. This was shy of the estimate of 57.1 points.

US Employment numbers for May were unexpectedly soft, and this boosted gold prices on Friday. The markets have become accustomed to strong employment data, so a soft Nonfarm Payrolls report was certainly a surprise. The US economy produced just 131 thousand jobs in May, well short of the forecast of 181 thousand. Wage growth also missed the forecast, edging down from 0.3% to 0.2%. The unemployment rate dropped to 4.3%, but this reading can be largely explained by a decline in the participation rate. The disappointing employment reports are unlikely to alter the Fed’s plan to raise rates next week, but policymakers remain cautious, and if upcoming data misses expectations, additional rate hikes in the second half of 2017 could be in jeopardy.

The terrorist attack on London Bridge has badly shaken the UK, and the security crisis could boost gold prices this week, as nervous investors look to park funds in safe-haven assets such as gold. The deadly attacks in Manchester and London couldn’t have come at a worse time for British Prime Minister Theresa May. Just a few weeks ago, May appeared destined to increasing her majority in parliament, and the election seemed little more than a formality. However, the two major terrorist attacks have turned the political landscape upside down, and May’s comfortable lead in the polls has largely evaporated just three days before the vote on Thursday. The latest YouGov poll predicts that May’s Conservatives will fall just short of a majority. If this happens, May will have a much more difficult job negotiating Britain’s departure from the European Union, and the uncertainty could be bullish for gold prices. With the country battered by terrorist attacks and the economy showing signs of slowing down, and the opposition parties will be hoping to gain seats at May’s expense, appealing to an electorate which is greatly concerned about the economy as well as the deteriorating security situation.

XAU/USD Fundamentals

Monday (June 5)

• 8:30 US Revised Nonfarm Productivity. Estimate -0.6%. Actual 0.0%
• 8:30 US Revised Unit Labor Costs. Estimate 3.0%. Actual 2.2%
• 9:45 US Final Services PMI. Estimate 54.1. Actual 53.6
• 10:00 US ISM Non-Manufacturing PMI. Estimate 57.1. Actual 56.9
• 10:00 US Factory Orders. Estimate -0.2%

*All release times are EDT

*Key events are in bold

XAU/USD for Monday, June 5, 2017

XAU/USD June 5 at 13:50 EST

Open: 1279.82 High: 1283.53 Low: 1277.82 Close: 1280.32

XAU/USD Technical

• XAU/USD was flat in the Asian and European sessions. The pair has shown slight movement in North American trade
• 1260 is providing support
• 1285 is the next resistance line
• Current range: 1260 to 1285

Further levels in both directions:

• Below: 1260, 1232, 1199 and 1175
• Above: 1285, 1307 and 1337

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a majority (56%). This is indicative of XAU/USD breaking out and moving to higher levels. 

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