Gold Market To Focus Jobs Report In Holiday-Shortened Trading Week
New York (June 27) Gold market participants will focus next week on the June nonfarm payrolls report for a pulse on the health of the U.S. economy, following a dismal first-quarter gross domestic product report released earlier this week.
The data, which normally come out on the first Friday of each month, are slated for release Thursday because of the Independence Day holiday in the U.S. falls on Friday, meaning government offices and markets are shuttered. Analysts said they expect the June nonfarm payrolls report will show a continued pick-up in jobs growth on Thursday, in spite of the dismal GDP figure.
August gold futures rose Friday, settling at $1,320 an ounce on the Comex division of the New York Mercantile Exchange, up 0.26% on the week. July silver fell Friday, settling at $21.077 an ounce, up 0.61% on the week. With one trading day left in the second quarter, gold prices are up 2.8% and silver are up 6.5%
In the Kitco News Gold Survey, out of 37 participants, 25 responded this week. Of those, 13 see higher prices, nine see lower prices and three see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
After shooting higher last week, gold prices traded in a fairly narrow range of roughly $20 this week, consolidating last week’s gain. Several market watchers said they were disappointed gold couldn’t break through resistance at this week’s high of $1,326.60. Some said once the short-covering in the futures market subsided, new buyers weren’t strong enough to advance the move, while others said the lack of physical demand capped the rally.
Several bullion dealers and those in close contact with the physical market all lamented the dearth of physical buying.
“The dealers we speak to are flat out doing nothing,” said one London bullion market participant. “They’re doing a little business just to do business. But they’re very sensitive to costs right now.”
Bullion dealers noted Chinese demand is also lackluster, with Shanghai Gold Exchange prices trading at a discount this week to London spot prices. At one point the discount was as wide as minus $2.50 an ounce, and recently traded Friday at minus $1.50.
The Northern Hemisphere summer is traditionally a slow time in the physical market as buying doesn’t pick up until merchants and jewelers need gold ahead of year-end festivals and holidays, but this year activity seems quieter than normal. That’ll change later, but for now physical buyers are sitting on their hands, and that removes a price support, sources said.
The London bullion market participant said he expects some buying in a few months ahead of the start of the planned 25-kilo bar contract announced by Singapore and the World Gold Council, slated to launch in September. “The refiners will need feedstock for that, so it will eventually lift prices,” he said.
Despite the choppy trading this week, other participants said they expect gold to move higher next week, citing both continued technical-chart strength and geopolitical worries.
“(A) classic bull flag is forming – prices are consolidating at the top last week’s breakout range,” said Ralph Preston, principal, Heritage West Financial.
Additionally, geopolitical worries could continue to support gold, said Jeff Nichols, senior economic adviser to Rosland Capital.
“The Iraq crisis seems more likely than not to worsen — and spread — especially with U.S. involvement in support of moderate Syrian rebels. And, it looks like developments in the Ukraine could heat up a bit, especially if more Western sanctions against Russia are imposed by the U.S. and Europe,” he said.
Next week is a four-day trading week because the Independence Day holiday falls on Friday. Normally trading volume and attendance would slump in the days leading up to the holiday, but with the important June nonfarm payrolls report slated for release Thursday, market participants are likely to stick around, even if only for part of the day.
After the dismal drop in first-quarter GDP, there may be great attention paid to the jobs report, analysts said. However, they added, gold watchers shouldn’t think that just because the first-quarter GDP contracted that June job growth will be weak. Instead, several said they are looking for the June data to build on recent gains. Early estimates compiled by MarketWatch call for job growth of 220,000, up from 217,000 jobs created in May.
Analysts at Nomura said they forecast total nonfarm payrolls will rise 245,000 as “labor market indicators released since the last jobs report have been generally favorable for payroll growth. Initial jobless claims and continuing claims have continued to trend lower. Regional manufacturing surveys released thus far in June suggest that manufacturing employment continued to increase. In addition, the Conference Board’s consumer confidence survey showed that consumers held a more positive view of the labor market,” they said.