Gold had rebounded somewhat last week although it remained below its psychologically important level of $1,200 per oz, suggesting that sentiment has not materially improved.
Gold came off its earlier lows but remained weak during Friday morning trading on December 2 – the near-certainty of a US interest-rate rise this month and an exodus of ETF investors put downward pressure on the market.
The spot gold price was seen trading at $1,176.45/1,176.65 per oz, up $3.35 on Thursday’s close. The metal fell on Thursday to its cheapest since February this year at $1,160.80 per oz.
Market was mainly focussed on the US jobs reports, numbers of which would be an important deciding factor for the rate hike. The report was expected to show that 177,000 new non-farming jobs were added in November and unemployment rate forecasted at 4.9%.
Once the numberS were out gold came under pressure. Let’s have a look at the important data released-
- On Thursday, US final manufacturing PMI in November bested economic consensus at 54.1 – 53.9 was called for.
- ISM manufacturing prices and PMI for November both topped projections at 54.5 and 53.2, respectively.
- October construction spending, however, came in at 0.5% month-on-month, a touch below the 0.6% prediction, while weekly unemployment claims were at 268,000 last week, which was above consensus of 252,000.
- On Friday non-farm payroll numbers showed that the USA added 178,000 jobs in November, against earlier expectations of around 165,000 and from October’s figure of just 161,000. In addition, unemployment dropped to 4.6% and wages climbed by 2.5%.
The recent spate of positive data is expected to produce higher rates when the US Federal Open Market Committee (FOMC) meets on December 13-14 – market participants see a 95% chance of a rate hike during the meeting, according to the CME FedWatch Tool.
The Asian physical market has picked up a little thanks to favourable seasonality and a fall in domestic prices. This should limit the downward pressure on international gold prices
This week, gold looks a little stronger because macro drivers have become slightly more favourable for precious metals from a weaker dollar and lower US real rates.
The gold price glided lower during Monday December 5 trading as its earlier push higher failed to hold and it slipped into negative territory.
The yellow metal had found support from its safe haven status after Italian Prime Minister Matteo Renzi was defeated in Sunday’s referendum.
The US Federal Open Market Committee (FOMC) will meet on December 14 – many participants expect an interest-rate rise to be announced, particularly after a run of positive data from the USA.
As of now, gold remains vulnerable ahead of the Fed meeting on December 13-14. Any stronger-than-expected US data is likely to raise the probability that the Fed lifts rates soon, pushing the dollar and US real rates higher, and in turn exerting downward pressure on the gold price.