Friday's close will be paramount for gold.
Gold traded to a high of $1,423.30 on Thursday, after coiling into a tight range early in the session. Early price action from $1,408.50 to $1,410 ran stops, and allowed traders to ride a wave of fresh buying to press this market to new swing highs. With a lower high overnight at $1,417.70, gold consolidated lower ahead of the nonfarm payrolls, and back toward support at $1,408.50.
This payrolls report was the most anticipated data release of the year thus far, as traders were hoping it would give them to get a further indication as to the state of the economy, and consequently the Federal Reserve's monetary policy going forward. However, 175,000 jobs were added, and this is basically in line with the 170,000 predicted. Meanwhile, the unemployment rate suffered a uptick to 7.6 percent from 7.5 percent. With a slight downward revision of the previous month's data, this report gives no significant indication that a change in policy will be coming.
(Read More: No Swoon: Job Creation Continues, Rate Up to 7.6%)
With the payrolls-related uncertainty out of the way, scalpers and investors lightened long positions,and have pressed gold back to the key $1,380 to $1,383 mark. A close below this level will likely mark the beginning of a bearish leg lower, which will be further confirmed with price action below $1,372.80. A close below this level opens the door to $1,350, and then $1,335.60.
(Read More: Gold Slides After US Payrolls Data Beat Forecasts)
On the other hand, this negative price action can be negated with a close back above $1,396.20.What would be even better for the bulls is a close above the key psychological $1,400 level.
Good luck, and good trading.