Gold Under Pressure on Interest Rate Expectations
Frankfurt (Sept 10) Gold prices are flat on Wednesday, continuing the trend seen a day earlier. In the European session, the spot price stands at $1254 per ounce. With no major releases out of the US today, we can expect the lack of activity to continue for the remainder of the day.
US numbers continue to point to a deepening recovery, and the Federal Reserve is expected to trim QE next week and wind up the scheme in October. The markets are expecting an interest rate hike by mid-2015, and will be looking for hints from Fed policymakers as to the timing of a rate hike. At the same time, the US labor market is showing some troubling signs. JOLTS Job Openings was unchanged in August at 4.67 million, short of the estimate of 4.72 million. On Friday, the eagerly-anticipated Nonfarm Employment Change crashed to 142 thousand, its lowest gain since January. This surprised the markets, which had expected a gain of 226 thousand. The disappointing release follows a weak ADP Nonfarm Payrolls report as well as a rise in unemployment claims.
After months of fighting in eastern Ukraine between government forces and pro-Russian fighters, a ceasefire which began on Friday appears to be holding up, although some sporadic fighting has been reported. Russia has denied assisting the rebels, but both Ukraine and NATO have said that Russian forces are actively involved in the fighting. The crisis has severely strained relations between the West and Russia, and trade between Europe and Russia could be significantly affected. European countries have already implemented sanctions against Russia, and have threatened further sanctions if the ceasefire does not last.