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Gold Futures Finish Higher While Jobless Claims at their Lowest

Jobless Claims
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EDITOR NOTE:

  • The price of gold seesawed back and forth yesterday as the “battle to retake $1,800 and hold” continues. Gold futures did end the day up, though. This up and down price behavior is based on several factors, according to experts.
  • The jobs market is a major factor in an economic recovery that could keep gold prices low. Some experts believe that the jobs market is recovering based on Labor Department data that shows Initial jobless claims fell by 35,000 to 310,000 in the week to the lowest point since March 2020.
  • However, central banks are also affecting the price. The European Central Bank is indicating it will start tapering asset purchases, just like the Fed is signaling, which could hurt the equities markets. Also, the Federal Reserve’s Beige Book just came out, and it shows “that economic growth was slowing amid the spread of the delta variant of COVID-19.”

Gold futures finished higher on Thursday, after spending much of the session seesawing between gains and losses, as investors weighed a drop in weekly U.S. jobless claims to their lowest since the pandemic began and news that the European Central Bank will slow asset purchases.

The precious metal’s “battle to retake $1,800 and hold it [is] not a sign of strength,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch. Gold wavered between losses and gains throughout the session.

“Jobless claims and, more importantly, continuing jobless claims ticking down is positive sign for labor markets,” he said, adding that the data did get some attention from gold market.

The dollar saw relatively steady trading and Treasury yields weakened after the European Central Bank President Christine Lagarde said Thursday that a decision to slow the pace of asset buying under the ECB’s pandemic emergency program didn’t amount to “tapering.” She said the central bank was merely recalibrating the its stimulus efforts.

In a statement, the ECB said “the Governing Council judges that favorable financing conditions can be maintained with a moderately lower pace of net asset purchases under the PEPP than in the previous two quarters.”

The statement was “somewhat hawkish, as many traders were surprised over the lower PEPP buying,” said Edward Moya, senior market analyst at Oanda, in a market update. “Good news for the euro is also very positive for gold prices.” 

On Thursday, December gold  GC00, -0.16% GCZ21, -0.16% tacked on $6.50, or 0.4%, to settle at $1,800 an ounce, following declines in each of the two previous sessions. The yellow metal scored a slight haven bid late Wednesday after the release of the Federal Reserve’s Beige Book indicated that economic growth was slowing amid the spread of the delta variant of COVID-19.

December silver SIZ21, -0.19% also moved up, settling at $24.18 an ounce, up 12 cents, or 0.5%.

“If dollar resilience becomes the theme for the rest of the week, gold could see sellers take price down to the $1,750 level,” warned Moya. On Thursday, the ICE U.S. Dollar Index DXY, -0.06% was down 0.2% at 92.457, though up by 0.5% in the week to date.

Data released from the Labor Department Thursday showed Initial jobless claims fell by 35,000 to 310,000 in the week ending Sept. 4. That’s the fewest claims since the pandemic struck in March 2020.

Employment data has become a key measure of investors bets on the pace of the U.S.’s recovery from the COVID pandemic, with the Fed setting the stage for the eventual reduction of accommodative measures that were put in place to provide much-needed liquidity to financial markets at the height of the distress caused by the deadly pathogen. However, those measures are viewed by a number of Fed officials as no longer needed.

Even so, Atlanta Fed President Raphael Bostic told the Wall Street Journal that it’s not likely the central bank will announce a decision to taper at its meeting this month.

Meanwhile, the World Gold Council reported that gold-backed exchange-traded funds saw net outflows of $1.3 billion in August, “triggered by the dollar’s brief strengthening and rising Treasury yields at the beginning of the month.”

“Despite the recovery in the gold price during the second half of August, outflows were likely driven by changes in momentum and interest rates,” said Adam Perlaky, senior analyst at the WGC, in emailed commentary.

“The initial selloff, catalyzed by low liquidity conditions, may have unnerved some investors and resulted in lower investment demand,” he said. “However, gold remains a valuable asset for investors looking forward, as weak equity returns in emerging markets and persistently high inflation reports will serve as tailwinds.”

He also said September has been one of the “strongest months historically” for the price of gold, potentially offering an “opportunity for investors as we head into the fourth quarter of the year.”

In other metals trading Thursday, December copper HGZ21, 3.90% tacked on 1.2% to nearly $4.29 a pound. October platinum PLV21, -0.28% fell 0.2% to $974.50 an ounce, while December palladium PAZ21, 1.76% settled 4.2% lower to $2,142.80 an ounce.

Originally posted on MarketWatch

All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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