Gold price lower but clings to weekly gain ahead of payrolls and wage snapshot

July 6, 2018

New York (July 6) Gold futures tipped into the red early Friday, struggling to build on postholiday gains ahead of the morning release of closely watched U.S. jobs data and any signs within it of building inflation pressures.

As the economic release was awaited, the latest lob in the trade spat between the U.S. and China took effect Friday as expected, casting a cautious tone across riskier financial markets including U.S. stocks, and again failing to gin up the typical demand that historically would have flowed into haven gold.

Friday’s main focus was the jobs report due at 8:30 a.m. Eastern Time, with consensus estimates from economists polled by MarketWatch expecting 200,000 jobs to be added in June, with unemployment holding steady at 3.8% and average hourly earnings rising by 0.3%, a metric that has been closely followed as investors watch for signs of rising inflation.

Ahead of the report, August gold GCQ8, -0.30% fell $3.10 or 0.3%, to $1,255.70 an ounce. Its finish Thursday at $1,258.80 was the highest settlement since June 26, according to FactSet data. Futures at the start of the week hit their lowest levels of 2018 before climbing modestly over subsequent sessions. For the week, the gold futures contract is clinging to a 0.1% gain. The most popular fund tracking gold, the SPDR Gold Shares GLD, -0.21% meanwhile, was up about 0.3% this week.

“Traders are extremely cautious when it comes to gold, yet the trading range for gold is nearly $6 today, which shows that capitulation may happen soon,” said Naeem Aslam, chief market analyst with Think Markets. “The intraday price action has a bullish setup and it shows that the price has the potential to test the level of $1,280 [on the upside] in the coming days if the dollar weakness continues.”

Minutes from the Federal Reserve’s June meeting, released after the Comex settlement Thursday, showed policy makers had no inclination to pause plans for further interest-rate hikes, and gold edged down from its settlement level to around $1,257 in electronic trading. Higher rates are a gold-negative factor.

Meanwhile, the Trump administration officially imposed tariffs on $34 billion of Chinese imports at midnight Eastern Time, and Beijing reportedly had implemented tariffs on the same value in American goods, as promised.

Concerns about fraying relationships between the U.S. and its longstanding trade partners in the European Union, North American and China, have helped strengthen the dollar and have weighed on commodities priced in the monetary unit, including bullion.

Gold and the dollar split from their typical inverse relationship in early Friday action. The ICE U.S. Dollar Index DXY, -0.13% was modestly lower. A weaker dollar makes assets pegged to the currency, including gold, more attractive to buyers using other monetary units.

Gold demand also has been hurt by the fear that a trade spat may hurt Beijing’s economy, which already has shown signs of decelerating in recent months. China is one of the world’s biggest buyers in metals, including gold.

Around the complex, September silver SIU8, -0.45% fell 0.3% to $16.05 an ounce. Silver was about to shed 0.9% for the week. The most popular exchange-traded fund that tracks silver, the iShares Silver Trust SLV, +0.47%  was down 0.3% far this week.


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