Gold Records Minimal Gains Around $1885

The precious metal prepares to finish the week with losses near 0.60% as high US Treasury yields, led by the 10-year, around 3.12%, keep gold prices under pressure.

Gold persists downward pressured, and it seems that it would finish the week with losses of around 0.60%, extending its fall from April’s swing high at around $1998.30s, below March’s lows around $1890. At $1884.74 a troy ounce, Gold Prices reflect the greenback’s strength.

Gold set to extend its weekly successive losses to three sessions, as US Nonfarm Payrolls smashed expectations. The gold push above the $1900 figure proved short-lived. It lasted no longer than some hours, shedding earlier gains post-Fed hike on Wednesday, retreating below solid resistance around $1890, so gold traders are is ready to third weekly loss in a row.

It is worth noting that the dip in XAU/USD is courtesy of higher US Treasury yields, led by the 10-year benchmark note, which rose to a daily high near 3.12%, closing to the 2018 year high at 3.24%.

Headwind for gold was also generated by a firm US dollar in the week. Albeit printing losses on Friday, down 0.03%, is up 0.29% in the week, as shown by the US Dollar Index, sitting at 103.511.

On Friday morning, the US Department of Labour reported the Nonfarm Payrolls report for April, which showed an increase of 428K jobs added to the economy, beating the estimations of 391K. The Unemployment Rate remained unchanged at 3.6%, and according to the report, it was led by gains in leisure, hospitality, manufacturing, transportation, and warehousing.

Regarding Average Hourly Earnings, on private nonfarm payrolls rose by 0.3% m/m. Meanwhile, the annual-based measure increased by 5.5%, almost unchanged, compared to the previous month’s reading of 5.6%.

The labour market is robust, and it puts the US decline in GDP for the Q1 in perspective. This decline was due exclusively to significantly higher imports and lower inventory buildup. By contrast, domestic final demand increased strongly.

Employment growth remains high. In addition, companies still offer more than 11.5 million open jobs, indicating unchanged robust demand for workers. This demand is drawing from an increasingly empty pool of available labour, which is likely to keep wage pressures high.

XAU/USD is still neutral-upward biased, but as long as it struggles to reclaim $1890, that could open the door for further downward pressure. Additionally, the 50 and the 100-day moving average (DMAs), with the latter at $1883.16, below the former, are resistance levels that cap higher prices.

Upwards, XAU/USD’s first resistance would be March’s lows around $1890. A break above would expose the $1900 mark, followed by May 4 swing high at $1909.66. On the flip side, gold’s first support would be the 100-DMA, at $1883.16. Once cleared, the next support would be May 3 cycle low, around $1850.34, followed by the 200-DMA at $1835.77.