- Gold fell back to $1,800 in recent trading after stronger-than-expected US labor market data.
- The strong NFP number, strong wage growth and rising participation rate spurred a new buildup of Fed tightening bets.
Gold prices (XAU/USD) fell back towards the $1,800 level in recent trading on the back of the latest much better-than-expected US labor market figures for January. Before the data, the precious metal was trading near $1,815 and with tentative gains on the day. Now, XAU/USD is down around 0.3% on the day, hovering around $1,800. The bears will be watching for a test of Thursday’s post BoE/ECB lows in the $1,788 area, a break below which could open the door to an extension of technical selling that could push cash prices higher. gold towards weekly lows in the $1,780 area.
The strong US labor market report saw a large increase in NFPs and large wage growth, as well as the estimate of the size of the US labor force increased by about 1.5 million, causing a increase in Fed tightening bets. Unsurprisingly, this sent US yields and the dollar higher in a knee jerk response, weighing on XAU/USD, which is strongly negatively correlated with both . US money markets have increased their bets that the Fed will raise rates by 50bps in March to an implied 23% (from 14.3% on Thursday). Higher interest rates temper the appeal of precious metals.
As gold traders assess this week in full, the central bank tightening/aggressive line will be top of mind, following aggressive surprises from the BoE and ECB on Thursday and now in the wake of the latest jobs report from US A shift to higher interest rates/more aggressive central banks is not usually a conducive environment for gold in the long term, so the precious metal may struggle to find buyers in the $1,800 area. Attention now shifts to next week’s US consumer price inflation data which, if better than expected, may also spur a further buildup of Fed tightening bets next week, Which suggests more downside risks for XAU/USD.
Technical levels
Source: Fx Street
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