Gold Price Analysis: XAU/USD drops back from multi-week highs to $1850s after strong US NFP

• Gold fell back into the $1850s, taking daily losses to more than 0.5% after data revealed robust US job gains.
• Wage pressures were also revealed to have eased, which might alleviate pressure on the Fed to tighten so aggressively.
• Ahead of US ISM Services PMI data and more Fed speak, XAU/USD is still trading higher on the week.

Spot gold (XAU/USD) prices fell in the immediate aftermath of the latest official US labour market report, which revealed 390K jobs were added in May, more than the expected 325K. Markets saw a “hawkish” reaction to the data (i.e. reacted to price in a more aggressive Fed tightening outlook), with US bond yields and the US dollar rising. The yield on the US 10-year note was last up about 6 bps and back near the 3.0% level.

XAU/USD fell back to the $1860 area from pre-data levels in the upper $1860s, meaning it now trades lower by about 0.5% on the day, having hit multi-week highs near $1875 earlier in the session. Still, the precious metal remains on course to post a modest weekly gain of about 0.3% after finding support earlier in the week upon a dip back to its 200-Day Moving Average in the $1840 area.

Given that the latest US jobs data also revealed an easing of US wage pressures last month, some gold bulls might see the latest pullback as an opportunity to add to long positions and target a retest of weekly highs. Indeed, analysts had billed the wage metrics in this month’s jobs report as the most important, given the Fed’s focus on inflation. Gold traders should look out for the upcoming release of US ISM Services PMI survey data for May at 1400GMT and remarks from Fed Vice Chair Lael Brainard shortly after.

Technical levels