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But the Fed is unlikely to lift rates as soon as next week during its policy meeting, providing some support to noninterest-bearing gold.
"Despite the very strong nonfarm it seems that the expectation for a March hike are still fairly low," said OCBC Bank analyst Barnabas Gan, and the scenario of the Fed staying put at its March 15-16meeting was "supporting gold at this juncture".
But Mr Gan said he remained bearish on gold prices, predicting they would be at around $1,000-$1,150 by year-end, with the Fed likely to raise interest rates at least once this year.
The Fed increased US interest rates for the first time in nearly a decade in December amid signs of strength in the world’s top economy.
US gold for April delivery dropped 0.8% to $1,261.10.
HSBC analyst James Steel believes the rally in gold remains largely intact with the metal not falling sharply despite the strong US jobs data.
"But at these high prices restrained physical demand may begin to temper the rally and we could be in for some profit-taking or liquidation," Mr Steel wrote in a note.
Hedge funds and money managers reduced their bullish bets in Comex gold in the week to March 1 for the first time since switching to a net long stance in mid-January, US Commodity Futures Trading Commission data showed on Friday.
China's gold reserves stood at 57.5 million fine troy ounces at the end of February, up from 57.18 million at the end of January, the central bank said on Monday
Gold first support at 1260/59 but below here is more negative & targets 1253 then 1250/49. If we continue lower look for the most important support of the day at 1247/46. Try longs with stops below 1242. A break below 1245 is a short term sell signal & targets 1240 then 1235, but we could fall as strong support at 1229/28 for a buying opportunity.
Holding first support at 1260/59 re-targets trend line resistance at 1267/69. If we continue higher look for 1274/75 which could see a high for the day. Shorts are risky in the bull trend but I do think they are worth trying with stops above last week's high at 1279. Just be aware that a break higher targets 1283/84.
Reference: Reuters, CFTC, FXStreet
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