Positive data or negative?
Hike rate this year or next?
Strong dollar or weak?
Stable equities or volatile?
Gold up or down?
Well a lot was expected to happen this week. Precisely, the above mentioned questions are somewhere down the line related to each other.
A positive data strengthens the dollar thus increasing the chances of rate hike which would push gold prices down. And even vice a versa.
Till mid-week, majority of the market participants believed that the data due to be released on Thursday and Friday would come in as a surprise package for all. Gold eased on Wednesday, staying on track for its biggest quarterly loss in a year as the dollar strengthened and the market awaited clarity on the timing of a hotly anticipated U.S. interest rate rise.
The spot gold price was seen at $1,112.90/1,113.10 per ounce, down $2.30 on Wednesday’s close and its lowest in around two weeks. Gold was stable on Thursday afternoon in London following the release of mixed US data and ahead of tomorrow’s blockbuster US jobs report.
- On Thursday, US weekly unemployment claims came in at 277,000 under the psychological 300,000 mark.
- During the third quarter, 205,759 jobs were shed, the largest figure since the third quarter of 2009.
- US PMI came in as expected at 53.1 and construction spending slightly better than forecast at 0.7 percent.
Now that the unemployment’s claims and PMI data was out, markets shifted focus the significant US non-farm payrolls data slated for release on Friday. The tables for gold turned once the report was out:
- Non-farm payrolls in August sank to 173,000, the first sub-200,000 reading since April.
- The US economy added 142,000 jobs in September, below the forecast of 201,000, and the August figure was revised down to 136,000 from 173,000.
- The only positive news coming in was that unemployment rate was unchanged at 5.1per cent.
- The labor participation rate fell to the lowest level since October 1977 at 62.4 percent, while wage growth was flat.
The yellow metal prices augmented on the release of lower than expected US data, nearly erasing the losses accrued in five consecutive negative sessions.
Physical demand and volatility did not come in much from the Asian markets as the Chinese markets are closed for Golden Week holidays and will reopen on October 8 and the Indian market too was closed on 2nd October.
The disappointing non-farm employment change has taken the market by surprise and the reaction has been quite strong such that there are strong sentiments that a chance of increase in interest rates not happen this year thus declining some of the concerns that higher US rates would have a negative impact on emerging markets.
Investors were considering for indications on the timing of the US rate rise. With two Fed meetings now left before 2016, markets now believe that the rate hike won’t happen this year. But there are some who believe that the Fed may announce a rate hike in its last meeting of 2015 due in December.