Gold extended its rally following the weak US jobs report published earlier. The key question now is weather the disappointing data will have a lasting impact on the dollar and gold, and whether gold will be able to climb above the next KEY resistance area starting around $4,366 to around $4,400ish (shaded in yellow on the chart).

I doubt the weak jobs report will have a lasting impact on gold, even if this does reduce the probability of a September rate hike. There are still two more CPI reports to come and an additional jobs report before the Fed meets, while uncertainty about oil prices remain.

So, there are a lot of factors that could still work in the favour of the dollar and against gold.

That said, gold’s breakout this week was not insignificant. The key question now is whether we will see any follow-through above the resistance area mentioned above. If we don’t then I wouldn’t rule out an eventual break below the $4,000 level in the coming days.

If oil prices and inflationary pressures remain elevated, the Federal Reserve will have to maintain its tightening bias even if there is further weakness in the labor market.

By Fawad Razaqzada, market analyst with FOREX.com