Gold News

Gold little changed ahead of US open; jobs data weighs

Spot gold prices moved in a $4 range early Friday, reaching lunchtime in London little changed from Thursday's sell-off at $649.50 per ounce.

"As the gold market continually fails to make its mark above the 100-day moving average," says the latest technical analysis from Standard Bank in Johannesburg, "it should remain under pressure in the near term.

"Momentary support should exist in front of $645 and the key 200-day moving average, currently around $643."

On the currency markets, the Dollar continued to push back Sterling and Euros following Thursday's much-stronger than expected US employment data from the ADP consultancy.

Showing a gain of 150,000 jobs against 97,000 forecast, the ADP report was followed today by June's official non-farm payrolls number. It showed a gain of 132,000 against 120,000 forecast by Wall Street.

"A lot of people wanting to buy gold were waiting for lower US interest rates," says Michael Widmer, head of metals research at Calyon in London. But after the latest jobs data, "it doesn't seem as if the Fed will pull that off in the next few weeks. So it's tough to take a bullish position on gold."

Bond investors were also hurt by the jobs data, with US Treasuries heading for their largest week-on-week drop in a month according to Bloomberg. The 10-year yield has risen 12 points as bond prices have dropped, hitting 5.14% just ahead of Friday's New York open.

Those higher rates encouraged fresh Dollar buying on the currency markets, where Sterling fell below $2.0070 despite strong industrial production numbers that appeared to justify Thursday's decision to raise Bank of England lending rates to a six-year high.

The Euro also fell, dropping as low as $1.3570 mid-morning. That helped keep the Euro price of gold above €476.50 per ounce. But Widmer at Calyon notes that the correlation coefficient between gold and the Euro now stands at 0.94 for this month so far, up from 0.50 in June.

A reading of 1.0 would mean spot gold bullion and the Euro moving in perfect lock-step.

"It looks like that $650 level is back to haunt us again," writes Phil Smith for Reuters Technical in India, "with the market stuck around there yet again after bouncing off the  upper channel of its current downtrend."

In the physical bullion market, the German refining giant Heraeus says that "traders reported this week from various countries including Indonesia, India, China and Germany that despite the recent drop in price, the interest by retail customers, be it for physical investment metal or for jewelry, remains down."

Looking ahead, however, the current lull in physical gold demand – particularly in India and China – may soon be reversed.

"Good rains forebode a good harvest that will boost agricultural income, helping farmers to buy more gold this year," reckons James Steel, metals analyst at HSBC – and Mumbai's Met. Office reports June rainfall was 7% above average.

India's gold demand accounted for one ounce in every five sold anywhere in the world last year. It may be set to hoover up physical gold from the international market once again after August, driven by a slew of festivals and the post-harvest wedding season.

"We look at gold as a barometer of wealth in the world," said Jason Mraz, head trader at Ospraie Management – the New York hedge fund running $7 billion in commodities and basic industries – at the Commodity Investment Summit in London last week. "The underpinning of demand is very strong."

"Most commodities in China still look extremely bullish, and China's influence looks fairly positive," adds Adam Rowley, a commodities analyst with Macquarie Bank in London. "On trend, we would see China as an unstoppable force in these markets."

To take a position in physical gold bullion today at low cost and on the tightest spreads possible, be sure to visit BullionVault now...

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