Gold price dropped $19.05, or 1.2%, to $1,586.07 per ounce on Friday following the latest U.S. jobs report

The gold price dropped $19.05, or 1.2%, to $1,586.07 per ounce on Friday following the latest U.S. jobs report.  The spot price of gold initially climbed to $1,609.48 after the June non-farm payrolls data, but quickly reversed course as strength in the U.S. dollar put pressure on the broader commodities complex.  With this morning’s gold price weakness, the yellow metal is now on pace for a weekly decline of 0.8%.

The U.S. Labor Department announced on Friday that payrolls increased by 80,000 in June, below the 100,000 consensus estimate among economists.  The unemployment rate remained unchanged at 8.2%, which was in-line with expectations.  Private sector payrolls, which exclude government workers, rose by just 84,000 – the smallest amount in ten months.

While the gold price generally reacts favorably to disappointing economic data, in recent months the yellow metal has traded more like a commodity than a currency.  Furthermore, it has displayed an increased negative correlation with the U.S. dollar – which has served as a safe haven amid escalating sovereign debt concerns in Europe.

“We are of the view that during election years there is ample pressure to maintain status quo for all events that could appear to offer weakness to the current government,” CIBC wrote. “Implementation of QE3 would be an admission that the government is not winning the economic war and provide fodder for the Republicans. In addition, with most of the rhetoric from both parties centering on future benefits that will be implemented, it is not surprising to see a strong dollar evolving during a period when we would measure the success of advancement as marginal at best. A weak euro is the main cause of the stronger dollar but it is our view that both currencies are weak and likely to remain weak.”

However, CIBC predicted that regardless of the election’s outcome, QE3 is far more likely in 2013. It based this view on the belief that policymakers will be much less concerned with the political implications of further easing and much more focused on providing support for the sluggish U.S. economy.  As a result, the firm reiterated its $2,000 average gold price forecast for next year.

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 wai...
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