Gold dips in Asia, but no signs of life in Vols

Gold dropped 0.4% to a low of $1266/Oz levels in Asia on caution ahead of the US data, which is expected to show the economy added 183K jobs and the wage growth picked up pace in July. 

US average hourly earnings are seen rising 0.3% m/m in July vs. 0.2% seen in June and the unemployment rate is seen falling to 4.3% from 4.4%. 

The drop in the metal is slightly surprising, given the sharp recovery from the low of $1256.60 in the overnight trade and the flattening of the Treasury yield curve. 

Risk reversals drop, Vols remain flat lined

The one-month 25 delta risk reversal currently stands at 0.05 compared to the recent high of 0.15 [July 31 high]. The drop in the risk reversal indicates scope for correction; however, 1-month ATM option volatility is flat lined around 9.00-9.10. Hence, the pullback could be weak and short lived. 

Gold Technical Levels

A breakdown of support at $1264 [14.6% Fib R of the rally from the July low] could yield a pullback to $1258 [23.6% Fib R] and 1255 [100% projection level]. On the higher side, resistance is seen at $1273.97 would open up upside towards $1284.20 [June 14 high] and $1300 [psychological level].