Gold Prices Follow The Bouncing Bear

Gold recovered from the steep decline last week. Yet it is still trading within a range, and probably will continue to do so until the Federal Reserve takes some sort of concrete action concerning interest rates.

This week we will see any strong bullish tendencies in gold prices troubled by the U.S. Labor Department’s report on job creation for the month of April.

So far experts have identified a range of between 200K to 225K new jobs created. That would be a far sight better than March’s number, which was an anemic 120K.

If the number comes in far below, say, 215,000 new jobs, look for gold to hold a mini-rally. If the figure points to a number higher than 225,000 new jobs, look for gold to plummet.

It would plummet because a more vigorous economy means that the Federal Reserve will be more likely to raise interest rates to banks, and possibly do it earlier rather than later.

That, in turn, would raise the opportunity cost of holding physical gold when compared against interest-bearing instruments such as bonds.

"Basically since November, gold has more or less been trading sideways," Julius Baer analyst Carsten Menke said. "(U.S. data) is likely to cause some more volatility, especially the labour market report on Friday. The gold market is going to watch closely what's happening with the economy in the States, and ultimately then what the Fed is going to do."

Equities were up worldwide except for the Hang Seng Index in Hong Kong, which was down marginally. All three American stock indices were up, rising about 0.3% by afternoon trading.

The dollar was stronger by half a percentage point against the euro today and so knocked a couple of dollars off the price of gold, which was up in regular trading. Overall, gold is up about 0.85%.

Further complicating the Fed picture – and therefore gold’s – was a robust rise in U.S,. factory orders, although some critics are saying it is not meaningful because it was mainly composed of transportation equipment orders. We say, “So what?”

More production equals more jobs, which equals more money in circulation.

Reuters reported that “New orders for manufactured goods increased 2.1 percent, the largest gain since July last year, after dipping 0.1 percent in February. It was the first rise since last August and was buoyed by a 13.5 percent jump in orders for transportation equipment.”

Crude oil was down on news that Saudi Arabia was halting its bombing in Yemen for the moment and on the rise of the dollar. However, a decline in U.S. stocks kept oil from declining too far. Demand is still weak. So, here we are again, waiting on the waiting game. We're will look for further news before Friday but that’s where the focus is and will remain.

Wishing you as always, good trading,