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Gold is headed for weekly close below $1300

  • DXY stays above 94 as greenback finds demand on upbeat data.
  • Risk appetite heightens in the last session of the week.
  • Gold loses $5 on the week.

After failing to break above the 200-DMA on Thursday, the XAU/USD pair spent the last trading day of the week under modest pressure. As of writing, the troy ounce of precious metal was trading $1293.75, losing $4.5, or 0.35%, on the day.

An improved market sentiment and a stronger USD strengthened  the bearish momentum of the pair during the second half of the day. The data from the United States showed that the unemployment rate dropped to its lowest level since 2000 at 3.8% and the nonfarm employment increased by 223,000 in May vs. the market estimate of 188K. Moreover, the business activity in the manufacturing sector continued to expand at a robust pace.

The upbeat data reassured markets that the Fed would go for another rate hike in June and lifted the US Dollar Index to a daily high of 94.44. The probability of a June hike is back above 90% according to the CME Group FedWatch Tool.

In the meantime, major equity indexes in the United States made a strong comeback after falling sharply on the United States decision to impose steel and aluminum tariffs. The Dow Jones Industrial Average added 0.9% while the S&P 500 rose a little over 1% as both indexes turned green for the week. In addition to the data pointing to a strong economy, news of Donald Trump finally confirming the meeting with Kim Jong Un on June 12 helped the risk appetite stay high during the session, which hurt the demand for traditional safe-havens such as gold.

Technical outlook

The XAU/USD pair fluctuated in a relatively tight $20 range in the past two weeks and failed to make a decisive move in either direction to determine its next short-term trend. In fact, the CCI indicator on the daily graph stays near the 0 mark, supporting the neutral outlook of the pair. On the upside, $1300 (psychological level) is the first interim resistance. Above that level, $1307 (200-DMA) is a critical hurdle for the pair and only a daily close above here could open the door for further gains toward $1317 (50-DMA).

On the flip side, short-term supports remain unchanged at  $1292/90 (May 24 low/Jun. 1 low), $1282 (May 21 low) and $1273 (Dec. 25 low).

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