Gold surges to fresh 5-week tops post dismal US jobs data

After an initial drop to weekly lows, gold staged a strong recovery and surged through $1270 level to fresh 5-week tops post disappointing US jobs data.

The precious metal's recovery move gained extra legs after the US monthly jobs report revealed that economy added 138K new jobs during May, well short of consensus estimates pointing to 185K jobs addition. Adding to the disappointing headline number, previous month's reading was also revised sharply lower to 174K from 211K reported earlier.

Meanwhile, average hourly earnings growth held steady at 2.5% y-o-y but was again a tad weaker than 2.6% expected. The only positive reading coming out of the report was an unexpected drop in the unemployment rate, ticking lower to 4.3% in May. 

Today's disappointing jobs data now seems to have dampened expectations for a faster Fed rate-tightening cycle and the same is evident from a sharp slide in the US treasury bond yields, which is eventually benefitting the non-yielding metal.

Moreover, a sharp US Dollar slump further boosted demand for dollar-denominated commodities and collaborated to the yellow metal's strong up-surge to the highest level since April 25.

Technical levels to watch

A follow through up-move beyond $1275-76 area should get extended towards $1280 intermediate resistance, before the commodity eventually aims towards testing its next major hurdle near the $1288-90 region.

On the flip side, $1270-68 zone now seems to protect immediate downside, which if broken might negate any bullish expectations and drag the commodity below $1262-60 support area, and $1250 level, towards the very important 200-day SMA support near $1242 region.