Gold Price To Watch For Potential Gov’t Shutdown And Employment Data

Washington (Sept 25)  The surprise resignation of U.S. Speaker of the House John Boehner could take some safe-haven demand away from the gold market next week as the move reduces the chance of a government shutdown Oct. 1.

Many analysts had noted that a potential government shutdown, as a result of a funding gap at the start of the month, would have been positive for the yellow metal. In a report published earlier in the week, TD Securities said they saw a 55% chance of a government shutdown.

Boehner’s announcement means that social conservative Republicans in the House can no longer threaten to remove him as Speaker if he didn’t support their plan to shut down the government.

Increased risk sentiment helped gold prices to end Friday’s session modestly lower with prices settling at $1,145.60 an ounce; however, the yellow metal has managed to end the week in positive territory, up 0.6% - its second consecutive weekly gain.

Looking ahead, although more bears have entered the marketplace, the majority of retail investors and market analysts in Kitco’s Weekly Gold Survey expect momentum to continue to push gold prices higher next week.

This week, 301 people participated in Kitco’s online survey. Of those respondents, 154, or 51%, were bullish on gold in the short-term. At the same time, 112 people, or 37%, were bearish and 35, or 12%, were neutral on gold prices.

Out of 35 market experts contacted, 19 responded, of which 10, or 53%, said they expect to see higher prices next week. At the same time, seven analysts, or 37%, expect to see lower prices, and two people, or 11%, were neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

“Gold has done really well the last couple of week and I suspect that we could see higher prices,” said Chris Beauchamp, senior market analyst at IG. “There is appetite to see this rally continue.”

Beauchamp added that he could see gold prices retest recent highs of around $1,155 an ounce.

Ralph Preston of Heritage West Financial noted that the technical picture appears to favor higher gold prices. “Prices are above the 50-day moving average (DMA) and $40 below the 200-DMA. If prices are able to climb above the 200–DMA, currently at $1182.10, I think that we will see a larger bull market begin to emerge,” he said.

At the same time, he added that a push below support at $1,095 would erase the current bullish market sentiment.

While markets will keep an eye on the posturing on Capitol Hill, the second key event of the week will be Friday’s release of September’s nonfarm payrolls report. According to consensus estimates, economists are expecting that 202,000 jobs were created in September.

Phil Streible, senior market strategist at RJO Futures, said that gold prices could move a little bit higher next week but he would be looking to establish new short positions as he sees the rally losing momentum on positive U.S. economic data.

“I don’t think employment will disappoint markets next week and as a result gold will fall,” he said.

Several analysts have noted that another 200,000 print in employment would pressure the Federal Reserve to hike rates in September, matching Fed Chair Janet Yellen’s recent comments that the central bank sees higher rates by year end.

“Yellen's attempt late yesterday to restore the focus to a likely rate hike this year tempered the enthusiasm for gold and led to the pullback,” said Ken Morrison, editor of the newsletter Morrison on the Markets. “I expect gold continues to trend lower this week likely testing first support [at] $1,125.”

Adam Button, currency strategist at Forexlive.com, said that he could see a stronger U.S. dollar pressuring gold prices next week.

However, some analysts have warned that markets shouldn’t read too much into Yellen’s recent comments.  Sean Lusk, director of the commercial hedging division at Walsh Trading, said that although Yellen was hawkish in her comments Thursday, the central bank has a habit of making hawkish comments at public events and then turn dovish during monetary policy meetings.

“I think people are going to start to realize that the Fed is not in any hurry to raise rates and in that environment, I think, dips in the market are going to be bought,” he said.

Source: KitcoNews