Commodity Market: Gold hovers above two-week lows as US Dollar strengthens ahead of key US NFP report

Following a sharp sell-off on Thursday, Spot Gold was hovering just above a fresh two-week trough on Friday, as the US Dollar strengthened to a three-week high, while the 10-year US Treasury yield surged to 1.63%, increasing the opportunity cost of holding the non-yielding metal.

“A much stronger dollar, a rise in U.S. Treasury yields along with a combination of generally overbought conditions in gold led to a rather decent sell-off,” ED&F Man Capital Markets analyst Edward Meir was quoted as saying by Reuters.

“We also had hints from the Fed that it could be opening up to the possibility of tightening. We still are constructive on gold and see some buying if the declines continue.”

The latest string of macro data showed that the number of Americans filling for unemployment benefits for the first time last week had decreased below 400,000, while employers in US private sector hired 978,000 workers in May, a much stronger job growth than expected and also the sharpest one since June 2020.

As of 9:07 GMT on Friday Spot Gold was inching down 0.05% to trade at $1,869.65 per troy ounce, after earlier touching an intraday low of $1,856.04 per troy ounce, which has been its weakest price level since May 19th ($1,852.23 per troy ounce).

Gold was on track to register its first loss in the past five weeks, while being down 1.78%. The precious metal has retreated 1.93% so far in June, following a 7.60% surge in May.

Meanwhile, Gold futures for delivery in August were edging down 0.10% on the day to trade at $1,871.50 per troy ounce, while Silver futures for delivery in July were down 0.06% to trade at $27.460 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching up 0.07% to 90.556 on Friday. Earlier in the session the DXY rose as high as 90.627, which has been its strongest level since May 14th (90.803).

In terms of macroeconomic data, today market players will be paying attention to the May report on US Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings due out at 12:30 GMT. Employers in all sectors of US economy, except the farming industry, probably added 650,000 new jobs last month, according to a consensus of analyst estimates. The report may indicate if labor market recovery continues as the world’s largest economy re-opens and it may also provide cues on the Federal Reserve’s near-term policy action.

Near-term investor interest rate expectations were little changed. According to CME’s FedWatch Tool, as of June 4th, investors saw a 93.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on June 15th-16th, down from 94.0% on June 3rd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,881.87
R1 – $1,898.37
R2 – $1,926.20
R3 – $1,942.70
R4 – $1,959.21

S1 – $1,854.04
S2 – $1,837.54
S3 – $1,809.71
S4 – $1,781.89