Abandoning the dollar for 'gold' amidst employment shock?...All-time high in sight

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The US employment shock has turned the gold market upside down. Spot gold prices surged over 2% to $4,137.25, and a massive short squeeze occurred, suggesting further upside potential to $4,222.

According to FXLeaders on July 7 (local time), spot gold prices rose 2.15% in late Tuesday trading, reaching approximately $4,137.25 per ounce. As the previous downtrend broke, buying interest rapidly flowed in to cover short positions.

What shook the market was the US employment data. US new jobs in June totaled 57,000, significantly below the market's expectation of 110,000. The unemployment rate also rose to 4.2%. The probability of an interest rate hike decreased from 66% to 50% in a few days.

Along with the slowdown in employment, the dollar also weakened. The US Dollar Index fell to its lowest level since April on a weekly basis. The People's Bank of China (PBOC) continued to purchase gold for at least 17 consecutive months. Emerging market central banks also showed a trend of reducing their holdings of dollar and euro-denominated government bonds and increasing physical gold.

Technical trends also changed rapidly. Gold prices rose past $4,050.1 to $4,137.25, invalidating the recent downtrend structure. The 14-period Relative Strength Index recovered to 44.02 from the oversold zone. The Moving Average Convergence Divergence (MACD) also formed a bullish crossover below the zero line.

FXLeaders suggested $4,091 as a short-term support level. On the upside, $4,157 was mentioned as the first short squeeze target price. Further upside was indicated around $4,222, where the 200-period exponential moving average on the 2-hour chart is located.

[Article Summary]

-Spot gold prices rose 2.15% to $4,137.25 as US new jobs in June amounted to only 57,000.

-Buying interest for gold strengthened as the probability of an interest rate hike decreased from 66% to 50% and the dollar weakened.

-Technical analysis suggested $4,157 and $4,222 as the next upside price targets.

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