Gold News

Gold Price Jumps After Strong US Jobs Data, Analysts Eye Risk of "Short-Covering" on Friday's Non-Farms

GOLD PRICE losses of 1% swiftly reversed Wednesday lunchtime in London, jumping to $1226 after stronger-than-expected US jobs data.
 
Today's private-sector ADP Payrolls Report said 215,000 jobs were added in the US last month, against consensus forecasts of 173,000.
 
Rising ahead of that number, seen by some analysts as a useful guide to the official US non-farm payrolls figure due Friday, the gold price had then fallen $5 per ounce before jumping 0.9% in volatile trade.
 
The gold price "[had] hit a fresh 5-month low in every session this week," says the Reuters newswire.
 
"Recent short-term stabilisation [in the gold price] was much weaker and shorter than expected," says the latest technical analysis from Axel Rudolph at Commerzbank in Frankfurt.
 
Repeating the same view on silver, "Remains bearish," Rudolph concludes.
 
"Gold has a decent chance of retesting its 2013 lows sometime in December given all that is going on," reckons Edward Meir at brokerage INTL FCStone, citing this coming Friday's US jobs data and then the Federal Reserve meeting ending Weds 18 Dec. 
 
"Support is at the major low of $1180 from June 2013," says chart analysis from London market-maker ScotiaMocatta, warning that technical indicators suggest "gold has room to fall further before being hindered by 'oversold' signals."
 
But "The main risk for gold is a short squeeze," counters ANZ Bank, pointing to the large short position now built up by speculative traders in US gold futures.
 
Previously peaking in early July, the gross short position in US gold futures and options was quickly unwound as the gold price began a 20% rally from June's 3-year low.
 
"Comex gold shorts are at a 4-month high ahead of Friday’s US employment data," agrees Walter de Wet at Standard Bank in London, noting the latest US futures positioning figures.
 
Either that means "disappointing data could very likely trigger large-scale short covering and push the gold price higher, quickly," says de Wet. Or Friday's non-farm payrolls report "is irrelevant to participants as the majority looks through the noise towards the end goal, i.e. tapering and a slow normalisation of US monetary policy which is coming closer by the day."
 
Opting for the latter explanation, "Our tactical view remains unchanged for now," Standard Bank's analyst concludes, also citing weak Asian demand for physical gold:
 
"Sell gold into rallies."
 
Meantime in India, where gold smuggling has reportedly risen 7-fold on the government's anti-import rules in 2013, "No one is giving us stocks, all of it is going to exporters," complained one Kolkata dealer to Reuters earlier.
 
Under rules introduced in the summer, 20% of new gold imports must be set aside for re-export.
 
Indian premiums to the world's benchmark London gold price today held around $130 per ounce, according to dealers.

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.

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