Gold erased four days of gains on Friday on the back of much stronger than expected US employment growth, a rebound in the dollar and a sharp fall in US treasury prices.
The market posted its worst daily performance since the end of last year.
Investors now expect that renewed optimism in the US will continue to see increased investment to rebuild inventories which will generate additional job opportunities. Despite the still uncertain situation in European debt markets, investors are growing in confidence that the US can recover even as Europe’s debt problem persist. Greece remains a major concern.
Gold looks set to remain volatile over the coming week, but Friday’s losses set the scene for further profit taking as the market has been sold from the highs of the year after rallying over 12% from January’s open.
Gold and silver made an interim top during the past week and it is very much likely that a correction will occur in the short run. Gold lost 1.8%, with the June contract giving back most of the week’s gains Friday. A further $50-75 correction in the weeks to come look as possible scenario. A 50% Fibonacci retracement from the current leg puts prices back at $1650.
