Gold price is dropping steeply after a stunning outcome on the US Non-Farm Payrolls (NFP) report. According to data from the US Bureau of Labour Statistics, Non-Farm Employment Change for May 2020 registered at 2509K, which was exceeded expectations of -7750K by a mile, and was also vastly better than last month’s -20537K figure. The unemployment rate came in at 13.3% versus the market expectation of 19.4% to beat expectations and show an improvement over the last reported value of 14.7%. A drop in the Average Hourly Earnings to -1.0% from the previous number of 4.7% did nothing to dampen the mood of investors on the US Dollar and other US index assets.
The NFP result indicates a stunning and unexpected turnaround in the employment market in the United States, as far as public sector unemployment is concerned. According to the report released by the BLS, limited resumption in economic activity is responsible for the uptick in employment. Sharp upticks in the hospitality sector, construction, retail trade and education and health services were seen, which overpowered the sharp decline in government employment.
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Technical Outlook for Gold Price
Gold price on the XAUUSD chart has tanked based on this result, as the yellow metal has succumbed to a spike in USD bids across several assets. The NFP result has reinforced the risk-on sentiment that markets have been seeing all across the world this week, pushing back on safe-haven flows.
Gold price action on the daily chart of the XAUUSD has violated the lower trendline of the descending channel and is making a strong push towards the 1680.24 support line. The XAUUSD daily candle’s 1.15% dip on the day has made contact with this support line and has bounced off it slightly. A confirmed breakdown of the channel trendline is needed to reinforce this bearish move. A further decline below the 1680.24 support opens the door towards the 1658.89 support line, with 1635.53 and 1590.70 looking like likely candidates if gold continues to be sold as safe-haven demand drops off steeply.
On the flip side, failure to confirm the breakdown of the descending channel could keep gold prices within the channel range, with 1722.31 being the ceiling that limits price push towards the upper channel border. A return of safe-haven demand will be the factor that allows the gold price to stay above 1722.31, with 1738.54 and 1753.29 remaining resistance targets for any such upsurge in gold prices. At the moment, the bias is for the gold price to trend lower; any advance my be an opportunity to sell into a rally.