Gold futures headed into the Labor Day weekend on an optimistic note after a disappointing US labour repor lowered the odds of a near-term Federal Reserve rate hike.
Gold for December settlement on the Comex division of the New York Mercantile Exchange gained $8.30 or 0.6 percent to $1,325.40 per ounce. Earlier this week, prices had tumbled to the lowest mark since late June.
With investment quiet during the week, most investors headed to the sidelines and awaited today’s release of the August non-farm employment change. In recent weeks, Fed chairwoman Janet Yellen had argued the case for a September rate hike had improved in recent weeks.
The hawkish rhetoric resulted in increased expectations that the Fed would increase the Federal Funds rate sometime before the year concludes.
However, the August report showed only 151,000 Americans joined the labour market, missing expectations of a 186,000 increase, while the employment rate was unchanged at 4.9.
“The data has failed to evolve as policy makers had expected, leaving the Committee’s overly optimistic forecast still yet unmet and, furthermore, perpetuating the argument that based on the economic fundamentals – not particular members’ concerns about an inadequate toolkit – the Federal Reserve has little if any justification to raise rates near-term,” Lindsey Piegza, Chief Economist at Stifel, said.
Still, the report wasn’t completely negative with average hourly earnings month-over-month ticking up 0.1 percent, a touch below the 0.2 percent estimate. Lastly, trade balance in July came in at -39.5 billion, besting economic consensus of -43 billion.
Meanwhile in paper holdings, exchange-traded-funds saw continued outlflows overnight, falling 4.7 tonnes to 2,101 tonnes total. Holdings had hovered around a three-year high over the past few weeks, but short-covering interest had eroded before the release, allowing an opportunity for dip buying.
“Precious metals could surprise to the upside today. Investors seem to have built some short positions across precious metals since the start of the week on expectations of a stronger US jobs report, reflected in the stronger expectation of a Fed move in September,” FastMarkets analyst Boris Mikanikrezai said.
“But given our view that the Fed is unlikely to raise rates in September even if US jobs numbers are robust because of rising downward risks to the inflation outlook, a short-covering rally may develop once the market starts to revise lower the probability of a Fed rate rise in September,” he added.
In other data, factory orders in July grew 1.9 percent, off the estimate of a 2.1 percent increase.
Turning to US markets, the Dow Jones industrial average and S&P were up 0.1 percent and 0.2 percent respectively, while the dollar reversed and was last trading 0.4 percent stronger at $1.1160 against the euro.
As for other precious metals, Comex silver for September delivery jumped 43.8 cents or 2.3 percent to $19.295 per ounce. Trade has ranged from $18.780 to $19.295.
Platinum for October settlement rose $11.50 or 1.1 percent to $1,060.40 per ounce, while the most active palladium contract stood at $672.10 per ounce, up $10.85.
(Editing by Tom Jennemann)
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Source: Bullion Desk News
