Gold News

Pre-Fed 'Profit-Taking' Hits Dollar on Jobs Surge, Gold Bullion Back Over $1200

GOLD BULLION bounced back above $1200 per ounce Friday lunchtime in London as the Dollar fell on what traders called 'profit-taking' following strong US jobs data ahead of next week's expected interest-rate rise from the Federal Reserve.
 
Non-farm payrolls expanded by a much-stronger-than-expected 235,000 last month, the official estimate said, cutting the US jobless rate to 4.7% as average earnings accelerated to 2.8% annual growth.
 
The Dollar retreated half-a-cent against the single currency Euro, touching its lowest level in 3 weeks.
 
Having dropped 3.0% from Friday last week however, gold bullion still held a 5% loss versus the Dollar from end-February's 3-month high at $1263.
 
Silver also bounced, briefly back above $17 per ounce from yesterday's late 6-week low, as bond yields eased lower following this week's 0.1 percentage-point rise in 5-year rates.
 
Physical platinum prices meantime rallied $7 per ounce off yesterday's lows at $934, but held almost 6% down from last Friday's finish near the lowest level since the first week of January.
 
"If you believe the Fed is already behind the inflation curve, then the market is even further behind," says a note from London bullion clearing bank ICBC Standard's strategist Tom Kendall.
 
"The US Fed's latest end-2017 forecast for its key Fed Funds interest rate was 1.4%, Kendall says, "but the December Fed Funds future is trading at 1.26%.
 
"The result of a repricing...would, all else being equal, be a sharp move upwards in real interest rates, and that would tend to weigh heavily on gold."
 
Chart of gold price vs. real 5-year US T-bond yields, adjusted by market-based inflation forecasts. Source: St.Louis Fed
 
"The more flighty element of the [bullion] market is taking profits," said the latest Metal Matters from precious metals clearer Scotia Mocatta's New York team Thursday, "[because it] sees a rate hike as being bearish for gold prices.
 
"[But] we expect that once the rate hike is either out of the way, or delayed, bullish sentiment towards gold will return, as the market focuses on the geopolitical uncertainties that now lie close by."
 
Alongside the US Fed rates decision next week, Wednesday will also bring the deadline date for President Trump agreeing to raise or suspending Washington's "debt ceiling" at its current $20 trillion, plus the parliamentary election in key Eurozone member the Netherlands.
 
That race is currently neck-and-neck between current prime minister Mark Rutte's People's Party for Freedom & Democracy and anti-European Union, anti-Islam Geert Wilders of the Party for Freedom.
 
Wednesday had also been named earlier this month as the UK Government's target for firing the starting-gun on 2 years until Britain formally quits the EU – a deadline now likely delayed by the unelected House of Lords voting against Prime Minister May's 'Article 50' bill and with the House of Commons still debating the finance ministry's new Budget.
 
New data yesterday meantime said the United States added a record 15 gigawatts of new solar panel supply in 2016, almost doubling the previous record and adding more capacity from photovoltaics – in which silver is a key component – than any other source of energy last year.
 
"Far from collapsing" meantime, automotive demand for platinum - primarily used as a catalyst to reduce emissions from diesel engines – rose by 1% in 2016 according to new data from the mining-backed World Platinum Investment Council.
 
"In the largest diesel automobile market, Western Europe, demand was up for the fourth consecutive year...[now expanding] year-on-year in every quarter since the third quarter of 2015, when the VW scandal [about cheating emissions tests] started to unfold."

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals