After taking a major tumble on Friday, gold remains directionless adding just 0.15% in the Asian session to trade at 1286.50 falling steadily at the end of the week after the US nonfarm payroll report showed that the US had created in excess of 200k jobs against a forecast of 120k, this was followed by a revision of the previous jobs added upwards. Earlier in the week, US data showed that its GDP was much stronger than forecast printing at 2.8% while expected to only grow by 2%. This raised the possibility that the US Federal Reserve might move up its timetable to being tapering their asset purchases.
On the other side, unemployment ticked up a drop, which is the gauge that the FOMC has set for changing its policy. Despite the stronger than expected job growth, the unemployment rate ticked up to 7.3 percent in October from 7.2 percent in September. The modest increase by the unemployment rate, which matched economist estimates, largely reflected the way furloughed federal workers were counted in the household survey.
The major event from last week was the ECB’s decision to reduce its cash rate to its lowest level of 0.25%; this news pulled down precious metals prices and rallied the US dollar against the Euro. This week traders will be closely watching U.S industrial production, German GDP for the third quarter, China’s new loans, U.S federal budget balance, Yellen testifies, ECOFIN summit, and U.S. jobless claims. The price of gold decreased by 2.19% last week; moreover, the average price reached $1,306.70 which was 2.24% below last week’s average rate. Gold ended the week at $1,284.50. Gold holdings of SPDR gold trust ETF rose for the first week in the past ten consecutive weeks. Nonetheless, during the month, the ETF’s gold holdings decreased by 0.41%. The ETF was also down by 35.71% for the year (up-to-date). Current gold holdings are at 868.418 tons. If the ETF’s gold holdings continue to pick up, this may signal the demand for gold as an investment is picking up.
Strong Chinese industrial production and export data has helped lift market sentiment, but the euro remained under pressure as looming deflation fears in the eurozone saw the ECB cut rates to a record low 0.25 percent last week. Inflation remains below expectations in the US, Japan and the Eurozone, which is pressurizing the prices of gold, which is a hedge against inflation.
Silver and copper are trading in the green this morning, silver is holding at 21.362 up by 45 points and copper is at 3.262 adding 4 points. Platinum and palladium are both in the red, fighting the trends. Platinum is trading at 1443.85 while platinum is down 2.50 at 756.50. Copper prices rose on Friday on optimism over positive Chinese trade data. However, a stronger dollar after US jobs report limited the upside in prices. China’s inflation climbed to 3.2%, raising fears of another tightening the central bank to curb credit supply and control inflation. However, Chinese factory output rose by 10.3% while fixed asset investment also rose to 20.1%. Base metals are expected to remain in range as investors would await the announcement of reforms at the Chinese Communist Party meet ending on November 12 to gauge the growth expectations for China. Tomorrow will be a big day for metals and commodities.