Gold has fractional gains even with moderate dollar strength headwinds

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Today both gold and silver gained fractional ground with gold as of 6:10 PM Eastern Standard Time fixed at $1763.90, after factoring in today’s gain of $1.90, or 0.11%. Silver gained $0.12 in trading today and basis the December futures contract is currently fixed at $22.65 which amounts to a percentage gain of 0.52%. The prices quoted our based upon the opening in Australia as the financial markets begin to trade overseas on Thursday morning.

Today’s gains occur in conjunction with dollar strength. The dollar index today gained 0.30% and is currently fixed at 94.245.

This is a dramatic reversal from today’s close in New York. As Reuters news reported this morning, “Gold prices were subdued on Wednesday due to a stronger dollar, although a slight retreat in U.S. Treasury yields limited losses for the safe-haven metal, with investors awaiting U.S. Labour market data due later this week.”

According to the Reuters report spot gold was down 0.1% at $1758.08 per ounce by 10:15 AM EDT. Gold traded to a low of $1744.84 and a high of $1765.90. Clearly gold settled just a few dollars off of today’s intraday high in New York.

Market participants traders and investors are putting their major bets on hold as they await on the U.S. nonfarm payroll data which will be released by the U.S. Labor Department on Friday, October 8. One insight to glean from today’s moderate gains is that for gold and silver to rally prior to the release of Fridays jobs report is impressive given the unknowns as to what the report will reveal. Gold is also moving higher against strong crosswinds which are the net result of the continuing rise of U.S. treasuries, even though they pulled back slightly from the recent highs with the 10-year Treasury note currently yielding 1.57%.

Another factor that has limited any strong upside move in gold is the current forecasts for Friday’s jobs report. ADP released their U.S. private jobs report in September today which revealed a strong rise in the September numbers. The ADP U.S. private sector employment data revealed today showed robust numbers above expectations revealing that 568,000 new jobs were added in September, this was the initial force that moved gold lower during the trading session. Economists that were pulled by Wall Street Journal had forecast that only 425,000 jobs would be added. This is in stark contrast to the August Labor Department’s report in which it was forecast that over 700,000 jobs were added in August. There forecast was almost excessively above the numbers released by the Labor Department with only 245,000 jobs being added.

However, it is the U.S. Labor Department’s report on Friday that will be the key report that will influence and shape the Federal Reserve’s current plan to begin tapering.

Reuters cited that Xio Fu, the head of commodities markets strategy at the bank of China International expressed that even if nonfarm payroll data is not “spectacular and just in line with expectations,” many voting members of the Federal Reserve are already convinced that the necessary components initiating the tapering process have already been fulfilled. For tapering. It is of Fu’s belief that tapering is an integral component which is pressuring gold pricing.

Furthermore, the article in Reuters cited a note penned by TD securities analysts in which they said, "months of continued ETF liquidations reflect the poor sentiment that is pervasive across the precious metals complex", their conclusion was that due to this fact the underlying motivation to own gold are becoming more compelling.

It is clear that there are more questions and answers in regards to the outcome of Fridays jobs report. The only certainty is that regardless of the strength or weakness of the report it will have a strong and profound impact on the financial markets and specifically gold.

Wishing you, as always, good trading and good health,

Gary S. Wagner - Executive Producer