In the highly anticipated Non Farms Payroll data released on Friday, markets were surprised to see that the US economy added a far greater than expected 236,000 jobs in February, with the unemployment rate falling sharply from 7.9% to 7.7%.
Whilst the impact of the data was tempered somewhat by a large revision to January's numbers (revised down to 119,000 from an initially reported 157,000), there is no avoiding the fact that the US economy is beginning to show signs of growth.
Some online commentators noted that many of the jobs were part time and the unemployment rate falling could be a sign of long term job seekers giving up the hunt for jobs, though the recent trend in US economic data is clear to us.
Unsurprisingly, gold tanked on the release of the news, though considering the strength of the data was very resilient, finding support at 1560 before rallying into the close to finish the session virtually unchanged and print a long tailed "hammer" candlestick on the chart. This bullish price action suggests that there are few sellers left in gold in the short term, the 1550-1560 support is solid and there is significant potential for a short covering rally from here.
However, the apparent recovery in the economy is potentially bearish for gold in the longer term, particularly the drop in the unemployment rate towards the key 6.5% level. This could put further pressure on the gold price, even though the COT reports and a host of other indicators suggest gold is very near to a major bottom.
In the short term, the market has solid resistance at 1585-1587 and solid support at 1550-1560. One of these areas will probably yield this week, pointing us in the direction of our next trade.
Today's video for subscribers looks at Friday's trading in more detail and our interpretation of the strengthening US economy.
Whilst the impact of the data was tempered somewhat by a large revision to January's numbers (revised down to 119,000 from an initially reported 157,000), there is no avoiding the fact that the US economy is beginning to show signs of growth.
Some online commentators noted that many of the jobs were part time and the unemployment rate falling could be a sign of long term job seekers giving up the hunt for jobs, though the recent trend in US economic data is clear to us.
Unsurprisingly, gold tanked on the release of the news, though considering the strength of the data was very resilient, finding support at 1560 before rallying into the close to finish the session virtually unchanged and print a long tailed "hammer" candlestick on the chart. This bullish price action suggests that there are few sellers left in gold in the short term, the 1550-1560 support is solid and there is significant potential for a short covering rally from here.
However, the apparent recovery in the economy is potentially bearish for gold in the longer term, particularly the drop in the unemployment rate towards the key 6.5% level. This could put further pressure on the gold price, even though the COT reports and a host of other indicators suggest gold is very near to a major bottom.
In the short term, the market has solid resistance at 1585-1587 and solid support at 1550-1560. One of these areas will probably yield this week, pointing us in the direction of our next trade.
Today's video for subscribers looks at Friday's trading in more detail and our interpretation of the strengthening US economy.
