Gold up in Short-Covering Bounce After Strong U.S. Jobs Report

May 4, 2019

New York (May 4)  Those long gold must be hearkening back to Yogi Berra: It ain't over 'til it's over.

Those who anticipated Friday's strong U.S. jobs report would sound the death knell for gold after the less-dovish Fed from earlier in the week ought to think again.

Bullion and futures of gold both rebounded in the latest session, after Thursday's tumble took prices of the yellow metal to four-month lows.

Spot gold, reflective of trades in bullion, was up $9.82, or 0.8%, at $1,280.41 per ounce by 2:00 PM ET (18:00 GMT). It plumbed $1,266.35 on Thursday, its lowest level since Dec. 27.

Gold futures for June delivery, traded on the Comex division of the New York Mercantile Exchange, settled up $9.30, or 0.7%, at $1,281.30 per ounce. The previous day, June gold fell 1% for biggest one-day percentage decline in more than two weeks.

"We made such a low in gold yesterday that there are hardly any weak hands left, and shorts covering is lifting the market today," said George Gero, precious metals analyst at RBC Wealth Management in New York.

"This shows that gold's good run isn't over despite the Fed's latest stance, and there is a need for bullion investors to refocus on the longer term," Gero added.

The Fed's Federal Open Market Committee kept the benchmark interest rate unchanged on Wednesday, in line with the market’s expectations. But the central bank also emphasized that it saw no compelling reason to consider a rate cut any time soon, citing rising employment and economic growth.

The dollar initially ran up after the Fed's statement. But it couldn't maintain its momentum on Friday despite the resilient U.S. jobs numbers for April. The U.S. unemployment rate dropped to a 49-year low of 3.6%.

The dollar index, which measures the greenback against a basket of six currencies, was down 0.3% at 97.29.

Forex traders said the greenback turned weaker after the ISM U.S. service sector PMI for April fell to its lowest level since August 2017.

Reflecting investor sentiment towards bullion, holdings in the world’s largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust (P:GLD), fell about 0.2% to 745.52 tons on Thursday, its lowest since Oct. 12, Reuters reported.

“The ETF holdings in gold continue to decline and in the last few week specs on COMEX switched from net long to net short as there is a risk on approach from investors,” ING analyst Warren Patterson told Reuters.

Elsewhere in metals, palladium rose nearly 1% in further recovery from Tuesday's shocking's 7% tumble triggered by worries that global supplies of the auto-catalyst metal weren't as tight as thought.

Spot palladium was up $10.30, or 0.8%, at $1,366.60 an ounce. The silvery-white metal, used for purifying gasoline emissions, traded some $300 above gold in early March before cutting that premium to about $100 or less lately.

Trades in other Comex metals as of 2:00 PM ET (18:00 GMT):

Palladium futures up $15.80, or 1.2%, at $1,359 per ounce.

Platinum futures up $20.35, or 2.4%, at $874.55 per ounce.

Silver futures up 4 cents, or 2.5%, at $14.98 per ounce.

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