Gold backs away from 10-month highs, sits comfortably above $1300

After touching its highest level since early November of 2016 at $1328.70, the XAU/USD pair reversed course and dipped below $1320 in the NA session before moving back into the positive territory. As of writing, the pair was trading at $1324, up nearly $3, or 0.25%, on the day.

The pair's quick jump was boosted by a sudden drop witnessed in the US Dollar Index following the disappointing employment report from the U.S. According to today's data, the unemployment rate in the U.S. ticked up to 4.4% in August from 4.3% in July while the nonfarm employment growth came in at 156,000, missing the market estimate of 180,000. Furthermore, average hourly earnings increased by a dismal 0.1% on a monthly basis in August, suggesting that the wage inflation is struggling to rise. 

However, the fact that the manufacturing sector continued to expand in August as the PMI data by the ISM and Markit revealed allowed the greenback to gain traction again. The US Dollar Index, which slumped towards the 92 handle with the knee-jerk sell-off, is now at 92.65, up 0.08% on the day.

In the meantime, major equity indexes in the U.S. started the day on a high note with the Dow Jones Industrial Average and the S&P 500 indexes both gaining around 0.3% at the moment, making it difficult for the safe-haven gold to preserve its bullish momentum.

Technical outlook

Both on the daily and the weekly graphs, the RSI indicator is near the 70 handle, suggesting that the pair is technically overbought and it could make a technical correction before continuing its bullish trend. On the downside, $1300 (psychological level) is a critical support ahead of $1293 (20-DMA) and $1276 (Aug. 25 low). On the upside, resistances could be encountered at $1328 (daily high), $1337 (Nov. 9, 2016, high) and $1350 (psychological level). 

Today's data from the U.S.

• US: Total nonfarm payroll employment increased by 156,000 in August
• US: Manufacturing output expands at weakest pace since June 2016 - Markit
• US: Economic activity in the manufacturing sector expanded in August - ISM
• US: Construction spending in July 2017 estimated at seasonally adjusted annual rate of $1,211.5 billion
• US: Index of Consumer Sentiment eased to 96.8 in August - UoM