Gold Steady After Softer-Than-Forecast U.S. Payrolls; No Momentum After Initial Uptick
New York (Sept 5) Gold futures are steady Friday after a softer-than-forecast U.S. jobs report, with traders saying market participants may have been hesitant to buy too aggressively in case the data are a one-time fluke and since the report may not be enough to alter the Federal Reserve’s stance on monetary policy.
Shortly before noon EDT, gold for December delivery was 50 cents higher to $1,267 an ounce on the Comex division of the New York Mercantile Exchange. December silver was virtually flat, adding 0.2 cent to $19.14.
The consensus of economists was for August nonfarm payrolls to rise by somewhere in the order of 225,000 jobs, which would have been the seventh straight month above 200,000. Instead, the Labor Department reported a smaller-than-forecast increase of 142,000.
Roughly one minute after the report, December gold hit its high for the day of $1,274.80 an ounce, compared to $1,266.10 one minute ahead of time. However, the metal has not generated further upside momentum.
“The initial reaction was obviously to the upside,” said Sean Lusk, director of commercial hedging with Walsh Trading.
Some traders had likely taken out short positions – or bearish bets -- ahead of the data in anticipation of another plus-200,000 payrolls number, said Lusk and Robin Bhar, analyst with Societe Generale.
“Those who bet wrong got out first, and that’s why you had the rally,” Lusk said.
“It initially rallied because the dollar weakened and the euro strengthened,” Bhar said. “Some of the (gold) positioning was probably on the short side expecting a good payrolls report. So this was a short-covering rally.”
There did not appear to be much fresh buying, he said, citing some general indifference from investors at the moment. Thus, the rally stalled as the short covering dried up, with gold not rising enough to trigger another round of short covering.
“The market ran out of steam and is back almost to where it started,” Bhar said.
Overall, Lusk said, the market might be hesitant to conclude so quickly that the labor market is running out of momentum already.
“I get the sense that the market is going to be looking for a revision of this number,” Lusk said. “Maybe the market didn’t really believe this number and it’s going to be revised for the better in the next unemployment report….I don’t think the trade believes this is going to stem the tide of further tapering (of quantitative easing by the Federal Open Market Committee).”
A hike in the federal funds rate wasn’t expected until next year anyway, Lusk said. “So I don’t think much has changed that way,” he said.
Barring safe-haven demand on any stock-market selloff, the metal could remain range-bound ahead of another meeting of the Federal Open Market Committee set for Sept. 16-17, he said.
Source: KitcoNews
