Gold News

Gold Price Leaps, Erases 3 Weeks' Drop as 'Pregnant Reversal Warning' Beats Strong US Jobs Data

GOLD PRICES jumped in London trade Friday, erasing the last 3 weeks of losses to new 6-year lows even as new data showed the US trade deficit widening last month to its worst November since 2008.
Separate US jobs data confirmed Wednesday's private-sector ADP Payrolls report, showing a strong rise in net hiring for November just ahead of analyst forecasts.
Rising 3.7% from this week's new 6-year low at $1046.50, the price of wholesale gold investment bars hit $1085 per ounce, just above mid-November's weekly close.
Gold also rose priced in Euros, reversing most of this week's 3% drop – but still heading for its lowest Friday finish since mid-September – after plunging amid yesterday's shock surge in the single currency on the FX market in the face of extra QE bond-buying and negative interest rates announced by the European Central Bank.
"In principle, the expansionary monetary policy followed by many central banks should lend support to the gold price," says a commodities note from Commerzbank in Germany.
"[But] market participants will now be waiting with bated breath to see what the US Federal Reserve will do in ten days' time."
The US is now "close" to full employment – one half of the central bank's mandate – said Fed chair Janet Yellen to Congress in her regular testimony Thursday.
On the other half, "Longer-term inflation expectations remain reasonably well anchored," Yellen said, "bolster[ing] my confidence in a return of inflation to 2%."
Thursday's ECB announcment, in contrast, "wrong-footed" traders, says US brokerage INTL FCStone, sparking "frenzied trade" – although "the precious metals complex had it relatively easier than some of the hotter markets like currencies and oil."
The rise in Dollar gold prices "show[ed] as a Harami," said Canadian-owned bullion bank Scotia Mocatta's technical analysis overnight, "which in Japanese Candlesticks translates to 'pregnant'...basically an inside day at the end of a very bearish down move."
After Wednesday's close to US gold futures trading "achieved a fresh cycle low at $1051," says Scotia, "the technical picture is a Reversal warning. A higher close [Friday] will bring in fresh buying of gold."
Across other investment markets Friday, the price of short-term US Treasury debt fell further but 10-year bonds rallied, edging yields down from Thursday's sudden 3-week high above 2.30%.
Crude oil meantime fell hard, with US contracts dropping near 12-year lows beneath $40 per barrel,  on news that the Opec oil cartel, meeting in Vienna, was unlikely to propose or agree a cut to output quotas.
New York equity markets rose sharply after the new US jobs data, but European stock markets held their earlier 0.8% losses for the day, pulling France's Cac40 index down to its lowest level since mid-October.
Silver tracked the surge in gold prices, rising some 2.7% against the US Dollar to hit $14.55 per ounce, almost its highest level in 4 weeks.

Adrian Ash

Adrian Ash, BullionVault Gold News

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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