Gold fell 1 percent on Friday after better-than-expected U.S. jobs data boosted the beleaguered dollar and potentially cleared the way for the U.S. Federal Reserve to raise interest rates for a third time this year. Spot gold was down 0.8 percent at $1,257.66 an ounce after falling 1.1 percent. It was on track to end the week down 0.9 percent following three straight weeks higher.
U.S. employers hired more workers than expected in July and raised their hourly earnings by the most in five months, signs of labor market tightness and offering the Fed some assurance that inflation will gradually rise to its 2 percent target. The U.S. dollar, which was wallowing near 15-month lows prior to the figures, rallied to around 93.5 after the release. The strong rise in non-farm payrolls together with the drop back in the unemployment rate to a joint 16-year low suggests the Fed will still need to raise rates again later this year, even if inflation remains subdued.
On technical front, gold will meet resistance at around $1,280, extending the downward path since September 2012. Still lingering around the key technical mark in the medium term, gold is expected to cross over technical resistance on any key events. Geopolitical tensions between China and India, Palestine and Israel, and in Korea Peninsula, could drive up both gold and the dollar. In the absence of substantial geopolitical risks, we expect the gold price to fall to $1,230 and end the year below $1,200 per ounce.
silver fell 2 percent to $16.28 per ounce, having hit a two-week low of $16.17. The U.S. Labor Department is expected to release upbeat July job report. Investors shall closely watch the support at $16.50. A strong job report would pull silver below the support, and trigger a round of decline in the medium term.

 
Dealing Room, ICBC Beijing Branch
Lv Yan

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