Currently, the gold markets seems to be more like a see saw as it remains directionless amid mixed economic data.
Gold got a little lift from its downward trend. Prices gained 1% for the week as a whole, after revisions to US payrolls data, from March and February, sparked speculation that the Fed could refrain from hiking rates in the immediate future.
The members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008.
Gold remained quite stable and was fairly unchanged on Friday afternoon trading sessions after a lukewarm US jobs report failed to answer many of the questions surrounding the US economy.
The spot gold price of $1,185.00/1,185.80 per ounce was up $1.40 on the previous session’s close. It peaked at $1,193.80 shortly after the release of the US jobs report.
Let’s have a look at the data released during the week-
Employment Data- The US economy created 223,000 jobs in April, which was essentially in line with the 228,000 forecast, while the unemployment rate dropped to 5.4 percent from 5.5 percent in March. Average hourly earnings increased 0.1 percent, slightly below the 0.2 percent expected.
But payroll employment for February was revised from 264,000 to 266,000, and the change for March was revised from 126,000 to 85,000. With these revisions, employment gains in February and March combined were 39,000 lower than previously reported.
The report said that the unemployment rate remained unchanged at 5.4%. The participation rate was also little changed at 62.8% last month.
Since April 2014, the participation rate has remained within a narrow range of 62.7 percent to 62.9 percent. Wage growth saw a smaller than expected rise last month, increasing by three cents or 0.1% to $24.87. Over the past 12 months, average hourly earnings have increased by 2.2 percent.
The average workweek remained unchanged at 34.5 hours. The weak wage growth was also “disappointing” and could keep the Federal Reserve postpone an eventual rate hike. A trend of firmer wage growth needs to be seen before “before Fed officials are ‘reasonably confident’ that inflation is on the path back to their target.
China- the Chinese trade surplus at $34.1 billion in March was up from $3.1 billion in February but below the expected $34.5 billion. As well, exports and imports both fell further than expected.
German- German industrial production disappointed at -0.5 percent as did the German trade balance at 19.3 billion euros. But Italian industrial production at 0.4 percent was better than expected.
ADP- In another precursor to today’s data, the ADP figure on Wednesday at 169,000 was below the forecast 199,000. A higher number today, however, could underpin a surge in the dollar and ultimately dampen any near-term prospects for gold – particularly while many investors are building the case for a delay to any interest-rate rises.
Dollar- The complex shrugged off a stronger dollar, which at 1.1200 against the euro this morning was building on gains of 0.66 percent on Thursday after US weekly jobless claims at 265,000 were better than the forecast 277,000.
Most financial markets were looking a little stretched, which could create volatility, ultimately supporting gold prices.
If the Federal Reserve is not that confident of a positive economic growth then it is quote expected that the first interest rate hike would be further postponed, which would further benefit gold.
Any negative data coming from US could drive up gold prices above $1200 an ounce.
In the week to come there are two major economic reports that ill have analysts glued to it.
1) April Retail sales report to be released in Wednesday
2) Regional manufacturing data for May to be released on Friday from New York
The retails sales reports is expected to rise 0.3% in April. Forecasts for the Empire State survey, show economists expect the index to rise to 5.2 this month, after falling to negative 1.2 in April.
If any of the reports come out negative then it would have a major impact on Fed rate hike expectations.
A weak retail sales number for April still isn’t going to stop the Fed from hiking in September.
Gold has fallen below people’s expectations and it will take something significant to get it back their trust. Until something unexpected happens, eventual rate hikes will continue to overhang the gold market.
Although gold is expected to remain range-bound next week, some analysts do see some positives that could help prices hover above the $1,200 an ounce level.
With little economic data to provide any solid direction for gold, some analysts are looking at outside markets for some guidance.
Apart from the two major US data reports analysts will be tracking the following-
⦁ Bank of England’s (BoE) interest rate decision
⦁ GDP data from the UK, Germany and from the Eurozone
Any unexpected geopolitical event like The Greek crisis, for instance, could prop up prices if Athens and EU officials fail to reach a deal needed to release bailout money to the cash-strapped nation.
Analysts are unsure as to how gold prices will move next week and expect bullion to take its cues from the financial markets, where any sign of volatility could help boost the metal’s safe-haven status.
|GOLD||$1178- $1220 an ounce||Rs.26,500- Rs.27,500 per 10g|
|SILVER||$16.00- $17.20||Rs.36,000- Rs.39,500 per kg|