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Gold dips to key support as NFP beat

gold should remain fundamentally supported in the long-term

By- Fawad Razaqzada

United States-The jobs report turned out to be overall a little stronger than expected, causing an initial positive reaction for both the dollar and US index futures. Although the headline number of 1.37K was bang in line with the estimates, the unemployment rate fell unexpectedly sharply to 8.4% and this encouraged traders to bid the dollar and sell gold, which fell below the key $1920 handle momentarily as traders wondered where it would close the day. But there were elements of weakness in the jobs report as a quarter of all job gains were in the government sector. What’s more, employment in June and July were revised lower by a combined 39,000.

“gold should remain fundamentally
supported in the long-term“

From the viewpoint of the Fed’s policymakers, Friday’s jobs report is good news for the economy, but we need to see continued strength in the months ahead to make the FOMC believe the recovery in the jobs market is sustainable. This alone won’t cut it – not when many economists agree that the pace of hiring will slow down in the months ahead, with the potential for the economy to dip again as the impact of past government stimulus wanes. Against this backdrop, I think monetary policy will likely remain loose for an extended period of time, and the Fed will probably not pay too much attention to just one month’s worth of data since adjusting their approaching a few weeks ago to target average inflation.

Thus, gold should remain fundamentally supported in the long-term. In the short-term, some weakness cannot be ruled out. We need to see a nice green daily candle around this  key $1920 level of support that gold was testing at the time of writing either today or in early parts of next week to keep the bullish bias intact.

As well as the bullish trend line, we have the old all-time high converging here. So, for as long as we hold above here, I would maintain my bullish bias on gold.


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