Gold drops to fresh weekly lows on upbeat NFP report

   “¢   US economy added 223K new jobs in May; unemployment rate drops to 3.8%.
   “¢   USD gains across the boards and prompts some fresh selling in the last hour.
   “¢   A modest uptick in average hourly earnings boost US bond yields and exert additional pressure.

Gold extended overnight rejection slide from closer to the very important 200-day SMA and tumbled to fresh weekly lows post-NFP.  

After a brief consolidation phase during the European session, the precious metal met with some fresh supply and lost some additional ground after the latest US monthly jobs report showed that the US economy added 223K new jobs during the month of May.  

The reading was much better than 189K anticipated and previous month’s reading of 164K, which coupled with an unexpected fall in the unemployment rate to 3.8%, provided a minor lift to the US Dollar and eventually exerted some fresh downward pressure on dollar-denominated commodities – like gold.  

This coupled with stronger wage growth data, coming in to show average hourly earnings grew 0.3% m/m and 2.7% on yearly basis, pointed to a modest pickup in inflationary pressures in the economy and seems to have revived hopes for a possible faster Fed monetary policy tightening cycle.  

The same was evident from a follow-through strong upsurge in the US Treasury bond yields, with the 10-year benchmark yield inching back closer to the 3.0% psychologically important level, further collaborated toward driving flows away from the non-yielding yellow metal.

With today’s downfall, the commodity has now reversed all of last week’s modest recovery gains and now seems all set to end the week on a negative note for the fifth time in the previous seven.  

Technical levels to watch

Immediate support is now pegged near the $1287-85 region, below which the metal is likely to head back towards challenging multi-month lows support near the $1282 level.

On the flip side, $1296-97 area now seems to act as an immediate resistance and is followed by the $1300 handle, which if cleared could assist the metal to aim back towards resting the $1305-07 barrier (200-DMA).