Good morning traders, 

We’re in for a busy day, as the US economy is due to release its NFP figures later today. Let’s have a look at the trade setup in GOLD . Prices for the yellow metal closed at 1,930.18, after placing a high of 1,951.02 and a low of 1,921.72. Overall, the movement of gold remained bearish throughout the day. Gold prices fell on Thursday, based on the strength of the broad-based US dollar on the day, despite the Fed’s latest dovish policy. The rally in the US dollar was driven by the US weekly jobless claims, which came in better than expected.

The positive economic data, which indicated less unemployment claims than expected, raised hopes for a quick economic recovery and put a dent in the safe-haven appeal, weighing on gold prices on Thursday. However, the recovery of the labor market was not very strong, as the jobless claims were still very high, despite having fallen below the 1M level for the second time since the pandemic started.

This week, economic data boosted the optimism for a steady economic recovery, as new Factory Orders for US-made goods increased more than forecast, and the manufacturing data also showed increased activity, almost reaching a 2-year high in August.

Meanwhile, on Thursday, at 17:30 GMT, the Unemployment Claims for the previous week dropped to 881K, against the projected 955K, lending support to the US dollar. Simultaneously, the Revised Non-Farm Productivity for the quarter increased to 10.1%, from the expected 7.3%, weighing on the US dollar. The Revised Unit Labor Costs for the quarter decreased to 9.0%, from the expected 12.0%, also weighing on the US dollar. The Trade Balance from the United States for July showed a deficit of 63.6B, against the expected decline of 58.2B, putting pressure on the US dollar.

At 18:45 GMT, the Final Services PMI for August rose to 55.0 from the 54.8 that was forecast. At 19:00 GMT, the ISM Non-Manufacturing PMI came in at 56.9, against the anticipated 57.0, weighing on the US dollar.

On the other hand, the losses in the yellow metal were limited, because of the rising concerns over the coronavirus pandemic. According to Johns Hopkins University, 25.8 million people have been diagnosed with COVID-19 worldwide, of whom 17M have recovered, and more than 850,000 have died. As the Indian government eased pandemic restrictions, the country reported more than 78,000 cases in a single day on Wednesday, surpassing even the US record number of new coronavirus cases for one day.

Australia has been pushed into a recession for the first time since 1991, as a result of the pandemic. The country reported the biggest drop in second-quarter GDP since records began. It is worth mentioning that the United States has turned its back on the global effort to develop and distribute a COVID-19 vaccine, led by the WHO. All these concerns kept the safe-haven appeal in demand, and capped any further losses in the gold prices on Thursday.

Furthermore, the top US infectious disease expert, Dr. Anthony Fauci, said that he disagreed with the White House’s new tactic to push for “Herd Immunity”, in response to the coronavirus. He added that we should do everything we can to prevent the spread of the coronavirus, and continue following the same strategy. His remarks came in after Donald Trump’s new health adviser, Dr. Scott Atlas, is urging the Trump administration to embrace herd immunity, in order to stop the ongoing spread of the coronavirus in the country.

Herd Immunity is achieved as soon as enough people in a population become immune to a virus, which in turn stops it from spreading. However, US experts have warned that the US has not reached that point yet, and going for this strategy would only cost more lives than the pandemic has already claimed. These comments kept the risk sentiment on-board, maintaining the pressure on gold.

Daily Technical Levels

Support Resistance

1,928.94 1,970.44

1,913.17 1,996.17

1,887.44 2,011.94

Pivot point: 1,954.67

 GOLD prices fell sharply, after violating the support level of 1,958. This level could work as resistance now, and below this, the gold prices could remain bearish until the 1,935 level. A slight retracement could be seen until the 1,955 level. We can expect a choppy session ahead of the NFP news today, but after the news release, we may see sharp fluctuations in the market. A bullish breakout could lead gold prices towards 1,979, and a bearish breakout could see gold dropping towards 1,910. Good luck!