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Spot Gold Rallies as the Greenback Weakens

Spot gold

The widely popular spot gold futures contract has rallied for two straight trading days into the end of last week. Gold was supported by a weak monthly U.S. non-farm payroll (NFP) report which sent the U.S. dollar lower. That was a boost for non-fiat currencies like the yellow metal.

The U.S. Labor Department’s monthly non-farm payroll report missed the mark. The American economy added only 266,000 new jobs last month as a shortage of workers and raw materials made an unwelcome impact.

The U.S. economy was expected to add nearly one million new jobs. The unemployment rate also rose instead of contracting. The U.S. unemployment rate came in at 6.1 percent instead of 5.8 percent. Average hourly earnings also rose, as inflationary pressures are temporally pushing higher. The labor participation rate also ticked up.

This soft labor data , did not benefit the greenback as the Fed’s view of lower interest rates was seemingly validated. This was a boost for spot gold. The Eurozone will release their monthly Sentix consumer confidence report today. The private Halifax housing price index will be released in the United Kingdom. The United States has nothing on their economic calendar.

Daily Spot Gold Technical Analysis (XAU/USD)

Looking at the above spot gold futures (XAU/USD) chart, the 14 day relative strength index (RSI) is near 70. This could cause a correction lower before rising higher, one again.

There is immediate technical support in play at $1,820 per ounce. This is the fifty (50) percent Fibonacci retracement level. The next downside barrier lines up at the key psychological number of $1,800 per ounce with the 38.2 percent Fibonacci level at $1,785 then coming into view. 

Looking higher, immediate technical resistance lines up at the 7 May high price point at $1,843. The two hundred (200) day simple moving average lines up at $1,850 per ounce with $1,860 then coming into play.  

About David Frank

David has his MA and PhD in Economics. He is a technical analyst who has been trading in the Forex world for over a decade. As an analyst and trader, David believes in the big picture by blending together technical analysis with the fundamentals behind the scenes in the Forex and Bond markets. David’s trading strategy is unique. He blends an understanding of fundamental and macroeconomics with technical analysis to offer a unique view into Forex. He applies several strategies including carry long positions, to take advantage of high yields in non-volatile markets, as well as using quicker, chart related analysis for day trading.

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