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Gold plummets below $1250, erase weekly gains on stellar ADP report

Gold traded with bearish bias on Wednesday and dropped to fresh session low below $1250 following impressive ADP report.

Spot metal accelerated the downslide and reversed all of its gains recorded in the previous two trading sessions after data showed private sector employers in the US added jobs at a blistering pace during March. The data would have certainty raised expectations from Friday’s official report (NFP ) and triggered a fresh leg of up-move in the US treasury bond yields, on increasing possibilities of further Fed rate-hike actions through 2017, which was eventually seen driving flows away from the non-yielding precious metal.

   •  US: Private sector employment increased by 263,000 – ADP

Rising bond yields also underpinned the greenback demand, lifting the key US Dollar Index back closer to mid-100.00s and further weighed on dollar-denominated commodities – like gold. 

With the metal repeatedly failing to conquer the very important 200-day SMA hurdle, it would interesting to see if the prevalent cautious sentiment, ahead of this week’s meeting between the US President Donald Trump and Chinese President Xi Jinping, is able to lend any support to the yellow metal’s safe-haven appeal and limit any further downslide. 

US President Trump and Chinese President Xi Jinping meeting is important – Rabobank

Meanwhile, a sustained break below $1240 immediate strong support would reaffirm strong selling pressure around $1260 region and turn the commodity vulnerable to extend its reversal move in the near-term.

Technical levels to watch

A follow through retracement below $1245 immediate support is likely to get extended towards $1241-40 important support, below which the metal seems all set to accelerate the slide towards $1225 horizontal support. 

On the upside, any recovery back above $1250 level now seems to confront resistance near $1254-55 area. However, major upside resistance remains at the 200-day SMA near $1260 region, which if conquered should pave way for extension of the near-term upward trajectory further towards $1275 resistance area.

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