Keep An Eye On US Dollar For Next Week -- Gold Traders

New York (Sept 6)  Gold traders are likely to keep an eye on currency moves next week after the euro fell to a 14-month low versus the dollar Thursday, following the surprising move by the European Central Bank to cut interest rates and embark on a quantitative easing program.

The euro skidded to $1.2920 Thursday on the news, although by Friday it floated off that low when the August U.S. nonfarm payrolls data came in lower than expected. Whether or not the U.S. dollar continues to rise versus the euro next week may determine gold’s movement, traders said.

December gold futures rose Friday, settling at $1,267.30 an ounce on the Comex division of the New York Mercantile Exchange, down 2% on the week. December silver rose Friday, settling at $19.138 an ounce, down 1.8% on the week. On the month, gold ended up 0.6% and is up 7.4% on the year. Silver is ended August down 5% and is up 0.3% year-to-date.

In the Kitco News Gold Survey, 22 participants responded this week. Of those, eight see higher prices, nine see lower prices and five see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Gold prices fell during the week, suffering their greatest drop on Tuesday as the market broke through recent support at the $1,270s area, basis the December Comex contract. Losses continued as the U.S. dollar added to gains during the week. Gold wasn’t able to capitalize on the news of the ECB’s interest rate cut and QE program as the euro weakness offset any support gold would have received from the new liquidity programs.

Friday’s surprising U.S. jobs data gave gold a boost, helping the metal add to modest overnight gains, but the rally was short-lived. The U.S. Labor Department said the economy created 142,000 jobs in August, far below expectations for a figure of over 200,000. The unemployment rate fell to 6.1%, a six-year low. The average pace of job creation this year is 215,000, up from 194,000 in 2014. One analyst said part of why gold didn’t have as much a reaction to the data stemmed from news breaking of a cease-fire between Russian and Ukrainian forces.

Daniel Pavilonis, senior commodities broker with RJO Futures, suggested the jobs news wasn’t bad enough to change the Federal Reserve’s path on ending quantitative easing and that ultimately the dollar moves higher.

Source: FORBES