Gold Prices Move Lower Amid More Jobs, Downgrades
By Alix Steel - 10/07/11 - 3:26 PM EDT
NEW YORK (TheStreet ) -- Gold prices lacked clear direction on Friday after the latest reading on employment in the U.S. showed better than expected job growth in September, but more European credit downgrades kept the markets volatile. As equities seesawed late in the week's last trading session, gold prices also waffled. Equities finished in the red with a last-minute dive after having staged a last-hour of trading rally, but gold prices broke into the green late on Friday afternoon.
Gold for December delivery was down $15.90 to $1,637.30 an ounce at the Comex division of the New York Mercantile Exchange early on Friday afternoon before rebounding to a gain of $4 at 4 p.m. The gold price has traded as high as $1,668 and as low as $1,627, while the spot gold price was down $10.90, according to Kitco's gold index.
Silver prices were down by as much as 89 cents an ounce on Friday afternoon, before rebounding late in the day for a gain of 20 cents to $31.15. The U.S. dollar index was up by a marginal 0.1% at $78.71.
TheBriefing.com forecast was for the private sector to add 136,000 jobs and for nonfarm payrolls to increase by 91,000. The actual private sector jobs added in September was 137,000 and nonfarm payrolls increased by 103,000. Gold traders had said headed into the employment reading that it could wind up being a coin flip for gold, and the seesaw action on Friday in gold and silver seemed to reflect this opinion. As the jobs data was digested on Friday, the initial reading of the headline number gave way to a more pessimistic take on the details -- more part-time workers, more people out of work for longer periods of time -- and a downgrade by Fitch Ratings of Spain and Italian debt added to a fragile market.
"This week's jobs picture seems a little bit muddled," said Jon Nadler, senior analyst at Kitco.com before the jobs data was released, "because the ADP report was encouraging, then the initial jobless claims, albeit coming in a little bit better than expected, were still not that stellar. I think the whole week is a seesaw."
The gold market was still trying to find its footing from its September 10% decline.
"Traders have very little to hinge on in terms of news," said Nadler.
The Bank of England, for example, eased monetary policy Thursday, pumping another 75 billion pounds into the system and gold didn't climb more than $30, a move that would be expected because of more cheap money.
The fact that copper was the lone gainer among metals on Friday afternoon was a sign of the lack of conviction in the metals trade. Additionally, the lack of any bullish action in palladium and platinum -- which given recent strength in U.S. auto sales could have merited a rally -- is one more sign of metals bulls easing off, Kitco's Nadler said. After the nonfarm payroll data was released, Kitco's Nadler added, "Nothing really tends to elicit the type of reaction we've been accustomed to in the last few weeks, the outsized moves, when everyone was treating even smaller news with lots of importance. Today people just want to say, 'get me out, get me flat.'"
The Kitco strategist said, "People remain focused on the other side of the pond and whether the 'Merkozy team" will handle Greece effectively. The market wants to see some resolution, and that's why the tug of war between profit takers and bargain hunters will continue." Expect gold to trade in a range of $1,600 to $1,700 and for silver to hover between $30 to $33, Nadler said. "No one is trying to push the envelope. The gold and silver crowd is just tired and stunned from the events of last week and fresh, sizable positions are not seen as desirable," Nadler added.
Nadler thinks gold's seesaw might end with the Indian wedding season, which kicks off in late October and typically leads to massive gold buying. In fact, any potential spike in prices might kick off rampant buying as Indians rush to take advantage of higher prices. Hindustantimes.com reported Friday some jewelers in Mumbai were seeing a 30% rise in gold demand from last year.
Strong physical buying will continue to be offset by investors taking profits, said Nadler, who sees a range of $1,650-$1,750 with bigger outsized moves possible.
"For the most part I think investors are happy to take smaller profits and just booking them. The fragility is still there," he said.
"If gold tests and fails again just above $1,700 then I think people will reassess gold," which might drag prices down to $1,480 or lower, Nadler added. "I think the focus will be on where the next returns can be gotten and so far I think the dollar has been a stellar performer ... outpacing stocks, bonds and commodities in general."
Another pressure on gold prices that will linger is funds moving into fourth quarter portfolio window dressing mode. With equities performance terrible this year, fund managers have to look at gold and silver as portfolio holdings to sell to make performance bogeys.
Gold mining stocks were all lower. Barrick Gold(NYSE:ABX) was lower by 1.4%% to $47.02 while Newmont Mining(NYSE:NEM) declined by less than 1% to $63.50. Other gold stocks, Goldcorp(NYSE:GG) and AngloGold Ashanti(NYSE:AU) were lower by close to 1% also, to $46.80 and $40.92, respectively. |
