Gold prices starting out the week on the backfoot

Gold is moving between $1,392 and $1,401 and they are down -0.22% at the start of this week but were significantly lower on Friday following a solid Nonfarm Payrolls report. Diminishing expectations of a Federal Reserve interest rate cut in July sent US yields and the Dollar markedly higher. Spot gold prices fell from the highs of $1,424 to $1,386 lows, losing 1.14% on a spot basis and the front-month futures contract dropped $20.80, or 1.5%, to settle at $1,400.10 oz following a close at $1,420.90 on Comex on Wednesday which was the highest for a most-active contract since May 14th. 

The headline payroll surprise benefited the Dollar. The 10-year yield rallied to close +4.66% higher and stocks ended lower. The DXY rallied 0.47%, rallying in the 96.72/97.44 range. In the data, the unemployment rate rose to 3.7% just 0.1% above May’s five-decade record and the labor force participation rate climbed to 62.9%, according to the Labor Department on Friday. 

For the week ahead, it is going to be busy with Fed Chair Powell speaking in a two-day testimony before Congress where he is expected to reiterate the view that the Fed stands ready to sustain the current economic expansion and that the jobs report was encouraging. Then, we also have the FOMC minutes to offer more clarity on what would lead the Fed to lend this support. "Global uncertainty and subdued inflation should remain key concerns for the Fed," analysts at TD Securities explained. 

Gold levels

1381 and the 20-d moving average ahead of 1375 guards the 20-day moving average ahead of a 50% retracement of the April swing lows to late June swing highs around 1350. On the flipside, 1440 is key resistance for a continuation to the May 2012 lows at 1527.