Global liquidity and real interest rates still indicates a higher gold price going forward

The gold price oscillated between gains and losses Thursday morning after several key U.S. economic reports were released.  The spot price of gold initially jumped to as high as $1,574.38 per ounce following the data, but subsequently retreated to $1,558.19 as the U.S. dollar recouped its earlier losses against a composite of foreign currencies.  With today’s fractional drop, the gold price is now down by 6.5% in May and on pace for its fourth consecutive monthly decline for the first time since August of 1999.

The gold price initially rallied after two disappointing reports on the U.S. labor market, but was later dragged down by widespread weakness in the broader markets and U.S. dollar strength.  The ADP Employment report showed job additions of 133,000, below the 150,000 consensus estimate among economists.  Weekly jobless claims also came in above the 370,000 level economists were expecting, at 383,000.  In addition, first quarter GDP growth was revised lower to 1.9% from its initial 2.2%.

Going forward, Dudley and his fellow central bankers will be keeping a close eye on tomorrow’s non-farm payrolls report.  Economists are expecting the economy to show a job gain of 175,000 and the unemployment rate to hold steady at 8.1%.

As for the gold price, Standard Bank analyst Walter de Wet wrote in a recent report to clients that “Structurally we remain bullish on gold but clearly misjudged the strength of USD.  We have not seen any change in the underlying fundamental drivers of gold – global liquidity and real interest rates. To us, both still indicates a higher gold price going forward.”

However, de Wet cautioned that “Our FX analysts have adjusted their 3 month Eur/USD target to 1.15. If this is reached, gold denominated in dollars may struggle.”

Analysts at Commerzbank provided a similar outlook for the price of gold.  “In view of the latest negative news from the euro zone, the US currency is likely to gain further against the euro, which should prevent any rise in the price of gold,” the firm stated. “Weak physical demand has also been weighing on the price of gold recently.”

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also waiting
Read more

Gold Price Futures (GC) Technical Analysis – Trader Reaction to Minor 50% Level at $1954.80 Sets the Tone

Image
  Gold futures closed lower on Thursday but up from its low of the session as investors battled a number of factors including U.S. economic data and outside market influences. Earlier in the session, gold fell over 1%, as positive economic data elevated hopes for a quick recovery while dampening the investment appeal of the precious metal. On Thursday, December Comex gold futures settled at $1937.40, down $11.60 or -0.60%. On the data front, a drop in U.S. jobless claims reported Thursday and positive manufacturing data reported earlier in the week are taking some shine off gold. A weaker Euro is also weighing on dollar-denominated gold by driving up thU.S. Dollar Index. U.S. weekly jobless claims fell below 1 million last week for the second time since the pandemic started, but did not signal a strong recovery in the labor market because the drop largely reflected a change in the methodology used to address seasonal fluctuations in data. Earlier in the week, a report s
Read more

India, not Trump, is the real reason behind the crash in gold prices

Image
If you have been puzzled about the crash in gold prices after Donald Trump's election, you are in the company of almost every analyst and media outlet in the western world. Gold and silver are a major part of the research at The Arora Report. A combination of our proven precious metal algorithms, extensive resources and knowledge of the emerging markets led us to alert subscribers to The Arora Report early that gold was about to crash and the reason behind it. Immediately after the election, the net position of The Arora Report in gold, silver and miners has been short as part of a sophisticated strategy.
Read more