Gold futures are edging higher on Thursday as traders await the release of a few U.S. economic reports including U.S. Weekly Jobless Claims. The trading volume remains relatively light with most of the major players keeping their powder dry ahead of Friday’s U.S. Non-Farm Payrolls report that could determine the timeline for the Federal Reserve’s plans to reduce its massive monetary policy program.
At 10:14 GMT, December Comex gold futures are trading $1819.20, up $3.20 or +0.18%.
Gold prices have been underpinned over the past couple of weeks as doubts have crept in about when the Federal Reserve will start unwinding its stimulus. Fed Chair Jerome Powell said last Friday the jobs recovery would determine the timing of asset purchase tapering.
Powell’s remarks have also weakened the U.S. Dollar by around 1.4% versus a basket of currencies since hitting a nine-month high on August 20. This has driven up foreign demand for dollar-denominated assets like gold.
Disappointing U.S. ADP payrolls numbers on Wednesday showed 374,000 hirings last month against a forecast for 613,000. This put additional pressure on the greenback while bolstering gold prices. The data also put more focus on Non-Farm Payrolls data which is forecast by a Reuters poll to show 728,000 jobs added in August.
Fed chief Jerome Powell said last week the labor market recovery would determine when the U.S. central bank would start cutting its asset purchase. Therefore, if yesterday’s ADP report is any indication, Friday’s NFP report should show jobs growth, but not enough to sway the Fed into announcing the timing of its stimulus reduction at its next policy meeting on September 21-22.
The news should trigger a further decline in the U.S. Dollar, which would be supportive for gold prices. We believe that the Fed will eventually start tapering its bond purchases, but the impact of the latest COVID-19 surge is likely to delay its plans. This should buy another couple of months of time for bullish gold traders since the Fed won’t meet again until November and December.
The median payrolls forecast of 80 economists polled by Reuters is for 728,000 jobs to have been created in August. This is down from a 750,000 forecast earlier in the week.
If the actual number comes in below 650,000 jobs then I think it would be safe to say the Fed will take a pass on announcing its tapering timeline at its September policy meeting.