A stronger-than-expected U.S. jobs report fueled speculation that the Fed may begin reducing its massive monetary stimulus soon, sending gold prices lower.

President Robert Kaplan of the Dallas Federal Reserve believes the central bank should reduce its asset purchases as soon as possible, and gradually, raising expectations that stimulus will be curtailed.

Last week, the jobs report exceeded expectations by a long shot, leading precious metals to decline into the close.

US job creation in July was the highest it has been in almost a year. Additionally, employment growth exceeded expectations. Furthermore, a new record has been set for unemployment, lower than it has been since March 2020.  July’s wage growth also exceeded expectations.

It appears this morning that gold traders who were late to the party are panic-selling the open markets as a result of low liquidity as well as a large number of stop losses, we are seeing a volatile open this week.

After that, the mid-April lows near $1,723 and the $1,700 a ounce threshold can encourage gold sellers to move toward the yearly bottom around $1,675 a ounce.

Moreover, reversal of the bond yields and higher greenback valuations led to heavy selling of the precious metal. As a result of the hawkish comments made by Richard Clarida in the previous week, gold prices have been struggling.

Additionally, the Delta COVID-19 variant is continuing to gain traction in the developed economy and is posing a significant threat to market sentiment, likely favoring the safe-haven US dollar.

Therefore, the yellow metal needs to reach above $1,805 an ounce to convince gold bugs it’s on the way back up.

This article was originally posted on FX Empire


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