Gold Prices were holding well up during the past week breaking the long term downward trend that started off in 2011. A weaker dollar and lower treasury yields has been supporting gold prices lately.
Gold steadied on Thursday after nearing a seven-week high in the previous session as investors awaited U.S. jobs data for further clues on the outlook for interest rate rises. Spot gold was 0.1 percent higher at $1,267.30 per ounce.
Gold rallied through most of July as the dollar fell on reduced expectations for a third U.S. rate rise this year. Inflation has been contained even though the labour market appears to be in its best shape in many years and despite double-digit U.S. earnings growth in the second quarter.
Reduced rate rise expectations tend Gold Prices to weaken the dollar, making dollar-priced gold cheaper for non-U.S. investors.
But by the end of the last week, gold prices were slightly bullish after the release of U.S labour report.
The latest non-farms payroll report on the US employment market was published, showing the economy added 209,000 jobs last month and that unemployment was low at 4.3 per cent, its lowest since March 2011.
This smashed economist estimates that 183,000 new jobs would be added. In response the dollar has popped higher, says Reuters Gold Prices.
The dollar is inversely correlated to the gold price, which is often held as a hedge as the global benchmark reserve currency.
Stronger economic data also raises the prospect of the Federal Reserve voting for a third rate rise this year in either September or December (rate rises tend to hurt non-income yielding assets like Gold Prices).
In the two hours after the report came out the gold price slumped by around $13, or one per cent, to $1,255 an ounce.
Gold’s recent trend has been largely defined by the fortunes of the dollar, which is good news for gold bugs as the greenback was languishing near 15-month lows earlier this week.
The safe haven metal dropped from $1268 as the July non-farm payrolls figure came-in at 209K, beating the estimated figure of 180K. The jobless rate dropped to 4.3%, while the June trade deficit narrowed more than expected. Wage growth rose to 0.3% as expected
Now the influential factor for gold remains that whether the dollar continues to strengthen or it may go weaker, which is likely to mean the US Federal Reserve has to remain less than hawkish. Apart from these financial drivers, any pick up in geopolitical issues could also fuel the rally.