Gold price slips, set for weekly decline ahead of jobs report
London July 7) Gold prices eased slightly Friday and are on track for a weekly decline as global bond yields extended a surge ahead of the highly anticipated U.S. jobs report release.
Silver prices, meanwhile, briefly tumbled in Friday’s Asian trading session with futures plunging nearly 10%, likely due to a trading error, before quickly reversing most of that decline, in what’s typically referred to as a “flash crash.”
And early Friday August gold GCQ7, -0.07% was down $2, or about 0.2%, to $1,221.30 an ounce. September silver SIU7, -0.83% shed 15 cents, or 1%, to $15.83 an ounce.
Gold, which is on track for a roughly 1.6% weekly drop thanks to its July 3 decline, did notched a Thursday gain. The yellow metal had climbed for a second straight session as the dollar slumped and global equities, including the S&P 500 index SPX, -0.94% and the Dow Jones Industrial Average DJIA, -0.74% took a turn into the red, amid signals that an era of easy-money policies adopted by central banks during the financial crisis may be nearing an end. The U.S. dollar DXY, +0.19% which tends to move opposite of dollar-priced gold, did manage a mild rebound at week’s end.
In exchange-traded funds, the SPDR Gold Trust GLD, -0.04% fell 0.3% premarket, the VanEck Vectors Gold Miners GDX, -0.23% dropped 0.4%, while the iShares Silver SLV, -0.20% was off 0.8%.
Markets are readying for the highly anticipated U.S. jobs report on Friday, where investors will be closely following for signs of wage growth, and with it potential inflation risk amid otherwise mild inflation readings in price reports. Economists polled by MarketWatch are expecting 179,000 jobs were created in June, with the unemployment rate holding steady at 4.3% and average hourly earnings at 0.3%, compared with 0.2% previously.
“It’s jobs report day in the U.S.—widely viewed as the most important economic report for the world’s largest economy—and people will be looking for signs that the labor market remains on track but, arguably more importantly, that wages are rising,” said Craig Erlam, senior analyst at Oanda. “Higher wages will be the clearest sign yet that inflation is likely to pick up in the future but we haven’t seen the tighter labor market reflected here yet.”
It has been the Fed’s general view that low inflation is transitory and that leaves the door open to further interest-rate hikes, including what most analysts expect to be one more rate increase in 2017.
At the same time that the Fed is contemplating is efforts to normalize policy, the European Central Bank has been signaling that it is getting ready to wind down its stimulus efforts after years of aggressive bond buying.
The collective shift in sentiment by central bankers has rocked bonds, yanking prices lower and sending global bond yields surging. However, the environment of rising yields has heightened the appeal of precious metals, which don’t offer a yield.
The global government bond selloff accelerated on Thursday after hawkish minutes from the ECB. The tantrum harks back to the warning shot fired across bond markets from then-Fed chief Ben Bernanke, who telegraphed the removal of extra monetary stimulus post financial crisis in 2013. Rising yields in Japan Friday even brought out more aggressive intervention from the Bank of Japan to tamp down the rise.
Bigger market dynamics may be working against gold for now, writes Mark Hulbert, MarketWatch columnist.
Gold’s inability to sustain its May strength is a textbook illustration of what happens when a rally begins on a foundation of too much bullishness. Gold in June gave back all of the $80 it gained in May, and is now almost exactly back to where it stood in early May, he notes in a column.
MarketWatch
