Gold News

Gold Prices Stick in $5 Range as US Non-Farm Jobs Data Match Forecasts, ECB Spike "Only Dead-Cat Bounce"

GOLD PRICES held in the morning's tight $5 range on the release of Friday's key US jobs data, swinging from $1252 to $1257 per ounce as non-farm payrolls showed a new addition of 217,000 for May, just shy of analyst forecasts.
 
"[Thursday's] surprise associated with more aggressive ECB easing might have triggered a near-term dash for gold," says bullion bank HSBC's precious metals team.
 
But because "a recovery in the Euro later in trading played a key role in boosting [Dollar] gold prices," the metal is still tied to the single currency's direction. So "the upside is limited and gold still faces near-term pressure," says the note.
 
"A tighter Fed and rising Dollar should eventually weaken the Euro, and probably many other assets," says a Reuters Breaking Views column.
 
Both before and after the US jobs data however, showing an unemployment rate of 6.3%, the Dollar weakened slightly Friday against the Euro, Sterling and Yen.
 
China's Yuan also rose against the Dollar after the People's Bank raised its target fixing by the largest proportion since January, but also vowed to ease reserve requirements for commercial banks lending to business and farms.
 
Shanghai gold prices recovered last week's closing level in Yuan, and went to their strongest premium to London gold in more than two weeks at almost $3 per ounce.
 
For as long as Dollar gold prices trade below $1264 per ounce, says HSBC's fellow London market-maker Scotia Mocatta in its daily technical analysis – pointing to the bottom of Tuesday last week's sharp drop – yesterday's rally in gold prices "is just a dead-cat bounce."
 
"A squeeze above $1287 is needed to negate the current downside bias," adds Australia's ANZ Bank.
 
"Gold prices could potentially receive support," reckons French investment and bullion bank Natixis, "if the Indian government decides to reduce or relax import duties."
 
But meantime it says, the last month's rise in the Dollar – plus continued gains in US stocks, a drop in finance-market volatility, and the withdrawal of Russian troops from the Ukraine border – "suggests an environment in which few investors perceive the need for a safe-haven store of value."
 
Going into Friday's US payrolls data, analyst consensus was for 218,000 net new jobs in May – only the fourth forecast above 200,000 of the last four years.
 
The reported number has now come in above 200,000 twelve times over the last 48 months.

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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