Gold prices trading for the week ended with a good sign, as it posted gains in the Friday session, continuing the upward movement we saw on Thursday.
In the North American session, gold was seen trading at $1323.74, up 0.18% on the day. This rise was seen post the release of the labour report told prices have enjoyed a strong week, gaining 1.9%.
The metal showed some strong gains earlier on Friday, as the metal touched a daily high of $1329.05, its highest level since November 2016. These gains were triggered by the disappointing nonfarm payrolls and wage growth reports for August, both of which missed their estimates.
On the release front, US job numbers were unexpectedly soft. Nonfarm payrolls slowed to 156 thousand, well below the estimate of 180 thousand. Wage growth also disappointed, as Average Hourly Earnings posted a small gain of 0.1%, shy of the estimate of 0.2%.
Although the US labor market remains tight, investors are fretting about the lack of wage growth, which has contributed to the low inflation which continues to hamper the US economy.
The Federal Reserve will also be perturbed by small wage growth, as a December rate hike is very much in doubt due to inflation levels which obstinately Gold prices trading remain well below the Fed’s inflation target of 2.0%. Currently, the likelihood of a December rate hike stands at just 36%
Gold is traditionally considered a safe-haven asset, and often benefits when investors get jittery and lose their risk appetite. Such was the case last week, as renewed tensions between the US and North Korea early in the week propelled the metal above the symbolic $1300 level.
On Tuesday, North Korea fired a missile over Japanese territory, drawing sharp condemnations from Japan and the US, with President Trump declaring that “all options remain on the table”
In times of uncertainty or crisis, investors typically take refuge in “safe” options like the Swiss franc, gold or the US dollar, but under President Donald Trump the greenback has lost its lustre, especially to the euro.
Although, tensions have since eased somewhat, if North Korea decides to fire another missile towards Japan or the US military base on Guam, gold prices will likely move higher. As well, as the markets digest the disappointing job numbers, we could see risk appetite continue to wane early next week, which could extend the current gold rally.
The reaction to the lacklustre U.S. Non-Farm Payrolls (NFP) report suggests gold will continue to exhibit a bullish behaviour ahead of the Federal Open Market Committee (FOMC) interest rate decision on September 20 as mixed data prints coming out of the economy sap bets for another rate-hike in 2017. Even though ‘the Committee expects to begin implementing its balance sheet normalization program relatively soon,’ the fresh forecasts from Chair Janet Yellen and Co. may ultimately heighten the appeal of gold if central bank officials attempt to buy more time and project a more shallow path for the Fed Funds rate.
In turn, U.S. Treasury Yields may stay depressed throughout the remainder of the year, and the precious metal may continue to retrace the decline from 2016 amid the shift in trader behaviour.
Weak U.S. economic data has effectively removed the Fed’s prospective rate rise scenario from the gold price equation – Gold prices trading at least for a couple of months although may have an impact in November as speculation will reign over whether the Fed will implement another small rise in December, or kick the can down the road again. The U.S. dollar is looking weak and a weak dollar tends to see the dollar gold price rise. And it is the dollar gold price which the market judges to be the most important indicator, even though the gold price in other currencies, like the euro or the yen, should perhaps be more relevant.
Gold prices trading The seemingly increasing threat of war between North Korea and the USA, will likely give the gold price a huge boost in the days and months ahead with safe haven demand escalating worldwide – and particularly in Asia and the U.S. itself.