Gold price at its lowest since March ahead of US non-farm payroll data

New York (Jun 4)  Gold slipped to its lowest point since March ahead of tomorrow’s non-farm payroll data.

UBS analyst Joni Teves said: “Gold price action continues to be choppy ahead of key risk events this week.

“Non-farm payrolls data due tomorrow should feed through to US Fed policy expectations and any material deviation from consensus, which is currently at 226,000 according to Bloomberg, could act as a catalyst for gold to break out of its range.”

Elsewhere, US productivity dropped 3.1% in the first quarter, more than expected having previously fallen 1.9%. It is the first time since 2006 there has been consecutive falls.

Unit labour costs rose with analysts suggesting the trend could point towards an increase in inflation.

This could help gold according to US investment firm Merk Investments: “In an inflationary environment, the value of cash versus gold may decline.”

But there are many levers driving gold at present and one of those pushing it lower is the turmoil in global bond markets.

Bonds have now erased all of the gains made so far this year and ECB president Mario Draghi did little to settle nerves in Europe by telling investors to get used to the increased volatility.

The ferocity of the recent bond rout has shaken investors, but it is both good and bad for gold as on the one hand it hints that the global economy is struggling, but on the other, the opportunity cost of owning gold is higher as bonds become more attractive.

Gold was trading at almost US$7 lower to US$1,178 today.

Meanwhile, silver eased 1% to US$16.32 while platinum lost US$1 to US$1,102.

Source: ProactiveInvestors