Gold tumbles below $1270 as US stocks surge to record highs

The XAU/USD pair recorded modest gains during the European session but lost its traction in the NA trading hours and dropped into the negative territory. As of writing, the pair was trading at $1279.90, losing $4.75, or 0.4%, on the day.

Although the greenback started gathering strength against its peers before the NA session went underway, the upsurge witnessed in the XAU/EUR kept the demand for the precious metal high, helping the XAU/USD pair stick to its daily earnings. However, the sustained bullish momentum of the US Dollar Index and the positive market sentiment forced the buyers to give up. In fact, the DXY is now at 93.80, up 0.53% on the day. Furthermore, the Dow Jones Industrial Average and the S&P 500 are on their way to another daily close at record highs as they add 0.4% and 0.45% respectively.

Earlier in the session, the upbeat data from the U.S. fueled the rise seen in the DXY with weekly jobless claims and the trade balance both coming in better than the market expectations. Moreover, the FOMC members' remarks on the monetary policy on Thursday strengthened the odds of a December Fed rate hike, giving an additional lift to the index. 

Nonetheless, the pair seems to have gone into a consolidation phase in the last hour as the trading volume starts to thin out ahead of tomorrow's critical NFP report from the U.S. Although markets expect the payroll growth to ease to 90K from 156K in September, a weak number is likely to be ignored by the participants as it would be assessed as reflecting the negative impact of hurricanes Irma and Harvey. "The negative impact on the labour market should be short-lived, as we have already seen initial jobless claims are beginning to come down again. We do not expect to see a decline in the unemployment rate (although risk is probably skewed towards an increase)," note Danske Bank analysts. 

• NFP Preview: Hurricanes likely pulled down jobs growth - Danske Bank

Technical outlook

On the downside, $1262 (200-DMA) remains as a critical support. A decisive push below that level could open the door to $1251 (Aug. 8 low) and $1243 (Jul. 26 low). On the upside, resistances align at $1282 (Oct. 4 high), $1295 (20-DMA) and $1300 (psychological level). With today's retreat, the CCI indicator on the daily graph eased to -100, suggesting that the bearish momentum is building up in the short-term.