Gold Price Analysis: XAU/USD returns below $1,760 after a spike up to $1,780

Gold futures have returned to previous ranges, below $1,760 on Friday, following a $20 spike, capped at $1,780 following the release of the US Non-Farm Payrolls report. The yellow metal has been moving without a clear direction over the last few days and is set to close the week barely unchanged.

Gold, on the defensive on Fed tapering expectations

Bullion prices jumped about 1% on the back of weaker than expected US employment figures, to hit two-week highs at $1,780. The bullish momentum, however, lacked follow-through, with the pair giving away gains as the market accepted the fact that this will not dissuade the Federal Reserve to start tapering bond purchases, probably a soon as in November.

US Non-Farm Payrolls increased by 194,000 in September, missing expectations of a nearly 500,000 increment. Beyond that, the unemployment rate declined to 4.8%, from 5.2% in August, while the average hourly earnings increased 0.6% on the month, and 4.6% year-on-year.

XAU/USD remains on the defensive, after having lost about 4% over the last four weeks on a combination of factors. The expectations of gradual monetary policy normalization by the world’s major central banks, and, in particular, the prospects that the US Federal Reserve will announce the end of QE over the coming months, are denting the appeal of precious metals.

Furthermore, the rally on US Treasury bond yields, with the US Benchmark above 1.5% for most of the week, has boosted USD strength, thus increasing pressure on the US dollar-denominated precious metal.  

XAU/USD: Above important resistance at $1,725 and $1,675

The pair is now consolidating above $1,745 (October 6 low). Below here, the next support level would be at $1,720 (September 29 and 30) low, which might expose 2021 lows at $1,6080/90.

On the upside, the pair should return above $1.760 (20-day SMA) and $1,780/85 (50-day SMA and September 22 low), which would increase confidence for the bulls and drive the pair towards September 15 high at $1.807.

Technical levels to watch