Friday morning, prior to the US non-farm payroll figures, saw gold trading as low as $1274, and the support that had twice been tested in April was once again under scrutiny. Previously, we stated that as long as gold did not close below $1278, we would be willing to remain long of the commodity.
So what happened? The non-farm payroll figures were better than expected and in the ensuing days, we saw the US dollar weaken against the euro and sterling. Historically there has been an association between US dollar weakness and a strengthening in gold. This comes from gold being quoted in US dollars, and the commodity being perceived by many as a fiat currency. Additionally, recent escalations inside Ukraine and the beginning of the latest Indian gold festival Akshaya Tritiya, have added to its appeal.
All of these added together lead us to maintain our current outlook for the precious metal, and only a close below $1278 would cause us to change our stance.