Non-farm payrolls data misses expectations the gold price would likely stand to benefit

The gold price held steady Thursday, trading up $1.90 at $1,748 per ounce. Gold prices showed a muted response to the news that jobless claims climbed by 6,000 to 402,000 – a figure slightly worse than market expectations. The gold climbed $31.15, or 1.8%, yesterday after the world’s leading central banks announced coordinated liquidity measures to aid the European financial system. In doing so, the gold price finished the month of November higher by 1.9% and extended its gain in 2011 to 22.9%.

Central banks from across the globe – including the Federal Reserve, Bank of England, Bank of Japan, and others – agreed to lower the cost of liquidity swaps in order to provide the European banking system with easier access to U.S. dollars. Many banks in Europe have been hit particularly hard by the sovereign debt crisis, and these measures were intended to “ease strains in financial markets,” according to a joint statement by the central banks. The enhanced liquidity measures indicated central bankers’ continued resolve to fighting deflation – a particularly bullish factor for the gold price.

Yesterday afternoon the Fed’s Beige Book revealed that U.S. economic activity increased at a “slow to moderate pace” over the past month. Although consumer spending “rose modestly,” the residential and commercial real estate markets remained weak. Furthermore, the employment market continued to be challenged as “hiring was generally subdued.”

Looking ahead, central bankers and investors will each likely be paying close attention to Friday’s U.S. non-farm payrolls report. While Wednesday’s ADP employment report came in at 206,000 – well above the consensus estimate among economists of 130,000 – the non-farm payrolls data and unemployment report have historically been more significant data points for the financial markets. Although the gold price was able to shrug off the better than expected ADP figure, encouraging data on Friday could present a headwind for the gold. Alternatively, if the non-farm payrolls data misses expectations the gold price would likely stand to benefit.

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

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad
Read more

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the
Read more