Gold

On Thursday, June 3, gold had a substantial price decline opening at $1910 and closing $37 lower, settling at approximately $1873 per ounce. It was a knee-jerk reaction in response to the ADP jobs report, which came in well above expectations by economists polled by the Wall Street Journal and Dow Jones and Reuters.

The underlying characteristic of gold pricing over the last 48 hours has been akin to a wild carnival ride. It began yesterday when ADP released its National Employment Report which concluded that private payrolls increased by 978,000 jobs last month. The report came in well above the economists polled by Reuters, and the Wall Street Journal. The economists surveyed by Reuters had forecast that private payrolls would increase by 650,000 jobs.

Gold prices tumbled following the release of the ADP private sector’s jobs report which came in well above analysts’ expectations. Economists surveyed by the Wall Street Journal had forecast that today’s ADP report would indicate an increase of 680,000 new private sector jobs added in May. The actual number came in closer to a million with the report indicating that private sector employment for new jobs added in the month of May came in at 978,000.

There is no doubt that the number one question on the mind of gold investors and traders is, “What is the current state of inflation in the United States?” They are pondering whether or not current rises in real costs of living are ‘transitory’ or ‘sticky’. In other words, what sectors are showing price increases that will be sustained versus what price increases in sectors are simply temporary.

As of 4:30 PM Eastern Standard Time, the new most active Comex futures contract for (August 2021) is currently fixed at $1902.10 after factoring in today’s decline of $3.30. However, spot or Forex gold is currently trading under $1900 per ounce and fixed at $1899.40, a net decline of just over $7 on the day. Gold futures traded to a high of $1919.20 and a low of $1894.50 before settling just above that key psychological level of $1900 per ounce.

With extremely different fundamental events influencing both gold, a precious metal, and copper, an industrial metal, both metals in terms of percentage gains had absolutely stellar performances over the last two trading months.

With only one more trading day in the month of May, gold futures have precariously clung just below $1900 per ounce. Today gold futures basis the most active June 2021 contract traded to a high of $1906.50 and a low of $1890.80. With the first notice day occurring tomorrow there will be many who are long June gold either exiting the trade and taking profits, or rolling over to the next most active month which will be August 2021.

Yesterday gold futures closed at $1899.90 after trading to an intraday high above $1901. As trading resumed in Australia, it seemed that gold prices were trying to form a base above that elusive key psychological level. The high in trading last night took gold futures basis the most active June 2021 contract to $1913.30. However, those gains would be short-lived as the market moved back below $1900 as it traded in New York.

As we spoke about yesterday, the market forces and events which have taken gold to higher pricing since the end of March are still dominantly in play. The two primary forces are dollar weakness and data indicating an uptick in inflation. These two factors greatly affect Treasury yields, and in turn, lower Treasury yields increase the bullish sentiment in gold. Recently the U.S. Labor Department showed that the consumer price index jumped to 4.2% in April.