Gold declines sharply on trade optimism, markets eye US NFP data

Gold declined sharply and lost more than $45 on US-China trade optimism and a slight recovery in US bond yield. The US 10 year bond yield has shown a nice recovery of more than 7% from yesterday close 1.472% and recovered more than 6% on upbeat US ADP employment data. The spread between the US-10 year and 2-year has widened from - 5 bps to +2.9 bps. The yellow metal hits low of $1506 yesterday and is currently trading around $1510.

US economy is expected to add 163000 jobs in the month of Aug compared to 163K previous month, while the unemployment rate will be unchanged at 3.7% and average hourly earnings at 0.3% vs 0.3% in Jul. Any better than expected US jobs might drag the gold further down as the chance of aggressive rate cut will diminish.

On the flip side, near term support is around $1500 and any violation below will drag the yellow metal till $1480/$1461 (55- day EMA). Any daily close below $1460 confirms bearish continuation.

The near term minor resistance is around $1522 and any break above will take the gold till $1533 (200- H MA)/$1537. The trend continuation can be seen only above $1560.

It is good to sell on rallies around $1527-28 with SL around $1540 for the TP of $1480.