Gold seems to have created a short-term top above $1,600.
The dollar will likely decline next week on disinflation concerns.
Gold could revisit $1,570 on dollar weakness.
Gold is expected to remain better bid next week on dollar weakness, but gains could be moderate as charts are signaling exhaustion.
The yellow metal is currently trading at $1,558 per Oz, representing just 0.43% gain on a weekly basis.
The week began on a positive note with prices rising to $1,587 on Monday and extending gains to a 6.5-year high of $1,611 during Wednesday’s Asian trading hours on escalating US-Iran tensions.
Iran launched a retaliatory attack on the American bases in Iraq, raising prospects of a full-blown US-Iran military conflict, sending risk assets lower and safe havens higher. Tensions, however, eased on the same day with reports stating zero US casualties in Iran attack and Tehran promising peace if there is no fresh retaliatory response from the US.
President Trump announced fresh economic sanctions on Iran but refrained from taking military action.
As a result, gold ended on a negative note on Wednesday, forming a big outside bar pattern and fell to $1,540 on Thursday before recovering to levels above $$1,550 earlier today, possibly on the back of a weaker-than-expected US jobs report.
Dollar weakness ahead
The Nonfarm Payrolls report released Friday showed the economy added 145K jobs in December, missing the expected print of 164K additions by a big margin. Further, downward revisions to previous months shed 15,000 jobs.
More importantly, the average hourly rose by just 2.9% year-on-year in December compared to the 3.1% projection.
With wage growth falling below 3% for the first time since July 2018, disinflation concerns may grip markets, leading to a decline in treasury yields and the US dollar – gold’s biggest nemesis.
At press time, the 10-year is seen at 1.825% and could slip to 1.74% next week. Meanwhile, the dollar index , which tracks the value of the greenback against majors, is seen at 97.37.
Data heavy week ahead
The US will release the Consumer Price Index, Producer Price Index, Retail Sales, Industrial Production and Housing data for the month of December. Weaker-than-expected and Retail Sales numbers will likely accentuate disinflation fears, adding to the tone around the US dollar .
China’s trade Balance, Industrial Production and Retail Sales are scheduled for release along with the four-quarter Gross Domestic Product. OANDA:XAUUSD