Although the XAU/USD (Gold vs. the American dollar) pair fell for most of the week, it had a nice bounce during the Friday session after August payrolls growth came in short of expectations. Data from the Labor Department report showed that unemployment rate fell to 7.3% but non-farm payrolls grew only 169K in August, well below expectations of 180K, and gains for the prior two months were revised down.
The pair traded as high as 1393.50 and settled at 1388.91. While some feel the government's jobs report suggests the economic recovery isn’t resilient enough to reduce stimulus, others think that the Fed will eventually come to the point where it feels the costs outweigh the benefits of more policy. Previously the Federal Open Market Committee had said “In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives”.
I think Friday's data makes it clear that the world's largest economy will expand slower than Fed's forecasts. However, the data is not a disaster and does not completely eliminate the possibility of a reduction in asset purchases this month. The Federal Reserve’s next meeting is scheduled for September 17-18. Until that time, concerns about a military strike against Syria will probably increase gold's attractiveness as a safe-haven asset.
Looking at the daily chart from a purely technical point of view, I expect prices to march towards the top of the ascending channel which currently sits at the 1457 level.
To the upside, there will be hurdles in the way such as 1395/1400, 1416 and 1425. If the bears take over and prices reverse, support can be found at 1380, 1360 and 1353/47. If the pair drops below the 1353/47 zone, it is possible to see a bearish continuation to the next key support level of 1319.
