INV: Gold price trades near six-week low ahead of US jobs data
iNVEZZ.com, Friday, August 1: The price of gold has been almost unchanged today, trading close to a six-week low, ahead of US jobs data that may show the country’s economy is gaining strength. It is poised for a third consecutive weekly loss, which would mark its longest losing streak since the four-weeks ended November 24, 2013. Bullion lost 3.5 percent of its value in July, or $46.2 a troy ounce – its biggest monthly drop this year – after gaining 5.59 percent in June. Because gold is denominated in dollars, any appreciation in the US currency makes it more expensive to buy for holders of other currencies. Last month, the ICE U.S. Dollar index (DXY) rose two percent. The precious metal is up 6.4 percent in the year-to-date.
The US Bureau of Labor Statistics is due to publish its monthly non-farm employment report today at 13:30 BST. The release is expected to show more than 200,000 people found employment for a sixth consecutive month. The US Department of Labor announced its unemployment insurance weekly claims yesterday at 13:30 BST. “In the week ending July 26, the advance figure for seasonally adjusted initial claims was 302,000, an increase of 23,000 from the previous week's revised level,” the release said.
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Despite the weekly increase, “The 4-week moving average was 297,250, a decrease of 3,500 from the previous week's revised average. This is the lowest level for this average since April 15, 2006 when it was 296,000. The previous week's average was revised down by 1,250 from 302,000 to 300,750.” The four-week average is considered a less volatile measure than the weekly change.
On the New York Mercantile Exchange (NYMEX), August futures were marginally up at $1,283.4 as of 12:42 BST. The price is currently below its 50-day, 100-day, and 200-day simple moving averages. It touched $1,280.60 yesterday, its lowest level since June 19.
After yesterday’s data, “the thought seemed to be that the U.S. economy is still on the right track,” David Govett, head of precious metals at Marex Spectron Group in London, said in a report today, as quoted by Bloomberg. “There was some physical demand around, although nothing overly exciting. This morning will be all about waiting for the employment numbers. If it is a good figure, then the precious complex will see another bout of selling,” he argued.
"Tonight's key nonfarm payrolls will be the decisive factor for gold's next move," MKS Group said in a note, as reported by Reuters. "The market is expecting an addition of 230,000 jobs, if it is well above this number gold is likely to continue to push lower, whilst the yellow metal should find a bid if it's less than 200,000."
UBS analysts said in a research note today: “Gold's price pattern in recent days and its decline towards $1280 suggests that the market is pricing in a strong US payrolls number today. UBS economists forecast a 240k rise in July (cons 230k, after 288k) and the unemployment rate falling another 0.1 point to 6.0% (cons 6.1%). A strong number (275k) will encourage further gold selling. From a technical perspective, support currently sits at $1280.52; a deeper decline could target next support at $1258.14, the June low.
A weak employment report (200k) should make recent shorts quite nervous. Much will depend on the reaction of the US dollar and equities; but initially expect gold shorts to cover. It will probably take a very weak report for fresh length to return in size. On consensus: this nullifies some of the rationale for selling gold in recent days, but gold still has to battle poor sentiment, momentum and challenging technicals. Here, much will depend on the details within the report.”
In the week to July 31, holdings in gold-backed exchange-traded funds increased by 0.17 million ounces to 59.62 million.
