Gold bugs are doing their best to defend $1,200.
Gold retested $1,200 on Friday, trading down nearly $50 from the highs following a much-better-than-expected employment report. We are not seeing the weakness follow through in this session, as the market has stabilized and is retesting the $1,233 retracement level, which will now serve as resistance. A close above $1,233 on Monday will signal a likely consolidation back toward $1254.60 to $1,255.70 this week.
Friday's jobs report led the U.S. dollar to soar to new swing highs, putting pressure on commodities priced in dollars, which we saw clearly in the metals. On Monday morning, the dollar was slightly in the red, which was giving the metals a breather.
(Read More: Gold's Jobs Nightmare)
It is not too surprising to see gold trade well off of Friday's lows, given what we saw in late Friday action. After bleeding through the light $1,208 to $1,210 support, the market did not close on the lows, as shorts took profit ahead of the weekend, and some investors found value at the $1,200 level.
Gold could have an easier time this week. After all, earnings season is beginning, and buying gold at the $1,200 level can still be seen as a way to hedge risk.
We look to see a consolidation higher, and support will sit at $1,221. Only a close below that will signal lower price action to come.