Gold Falls 2.2% After Good Jobs Number Lessens Expectations of Interest Rate Cut

  • Good non-farm payrolls number suggest Fed may not loosen
  • Gold was set for seventh weekly gain prior to sharp selling today
  • Should put more than ‘5%-10% of your portfolio in gold’ today

Gold futures market participants have used the better than expected jobs number to push gold prices lower today. The dollar has strengthened somewhat as expectations of a Federal Reserve interest rate cut in July have diminished somewhat.

A close below $1,380/oz and we could quickly see gold test support around the $1,350/oz level. Previous resistance will likely become support as frequently happens.

The wider financial and geopolitical backdrop will support gold and we are very confident this is a normal short term correction as gold embarks on the next stage of its bull market.

As reported prior to the jobs number by Bloomberg:

Gold was headed for the longest stretch of weekly gains since 2011 as investors count down to the release of a highly-anticipated U.S. jobs report that could provide clues on the Federal Reserve’s interest rate path.

Bullion’s higher for the seventh week as investors bet on looser policy from the central bank after signs of a slowdown. The non-farm payrolls data later Friday is projected to show a rise of 160,000 in June, and while that would up from 75,000 a month earlier, it’d be lower than the rise a year earlier.

It would take an “absolute blockbuster” result to change the view that the Fed will cut rates at its next meeting, said Chris Weston, head of research at Pepperstone Group Ltd. in Melbourne. Lower rates tend to benefit bullion.

Gold is trading near a six-year high as central bankers in top economies turn more dovish, with geopolitical and trade tensions also spurring demand. Veteran investor Mark Mobius said prices could top $1,500 an ounce, citing lower interest rates among the factors that are supporting bullion. Holdings in bullion-backed exchange-traded funds are near the highest since 2013.

Should put more than ‘5%-10% of your portfolio in gold’ today

People obviously look at gold as a play on real rates,” Weston said in a Bloomberg TV interview on Friday. “People are looking at the idea that we’re going to have this clear path of central-bank easing.

The old cliche of putting 5%-10% of your portfolio in gold is something that we’ve been advocating for some time and that allocation can probably be taken up a little bit there.”

Spot gold climbed as much as 0.6% to $1,424.30 an ounce, and was at $1,414.79 at 2:08 p.m. in Singapore. Prices are up 0.3% this week. Bullion hit $1,439.21 on June 25, the highest level since 2013.

A gauge of the greenback steadied after dropping for three days. U.S. President Donald Trump has accused both Europe and China of weakening their currencies to gain a competitive advantage in trade, and has repeatedly complained about the dollar’s strength. He’s also attacked the Fed for refusing to cut rates.

“Can you actually genuinely pick a G-10 currency that you say that’s really attractive right now?” Weston said. “I don’t think you can, and I think gold’s been working as that kind of best house in a pretty shabby-looking neighborhood. We’re getting to the point where the U.S. dollar is going to slowly grind down.”

Geopolitical tensions remain elevated. Despite declaring a truce in the trade war last weekend, China continues to stress that the U.S. must remove all the tariffs placed on Chinese goods as a condition for reaching a deal.

In addition, British forces this week seized a supertanker off Gibraltar carrying Iranian oil to Syria in violation of European and U.S. sanctions against the war-torn country.

In other precious metals, spot silver fell 0.3%, platinum rose 0.1% and palladium was steady.




News and Commentary
Gold Futures Score Highest Finish in Over 6 Years

Gold Prices Rise 1.2% to Hit Six Year-high Above $1,435

Gold Heads for the Longest Stretch of Gains in 8 Years

Bond Yields Are Falling to Record Lows as Investors Pull Back From Risky Assets 

US Sees Most Layoffs Since the Financial Crisis, Many in Retail Jobs

Video: Having Gold in Portfolio a ‘Great Thing’ – Probis

Gold Bull Mobius Says Every Portfolio Needs at Least 10%

Why Gold is Money: A Periodic Perspective

Bond Yields Plunge in Italy: Hello Christine Lagarde! – Mish

“The Outlook for Gold is Very Positive in the Coming Months” – Goldcore


LBMA Gold Prices (AM/ PM Fix – USD, GBP & EUR)

04-Jul-19 1415.25 1414.90, 1125.41 1125.55 & 1254.19 1254.59
03-Jul-19 1425.10 1413.50, 1133.52 1123.31 & 1262.78 1251.65
02-Jul-19 1393.10 1391.05, 1105.01 1101.02 & 1233.59 1231.77
01-Jul-19 1390.05 1390.10, 1099.81 1099.99 & 1227.41 1227.74
28-Jun-19 1413.20 1409.00, 1114.87 1108.18 & 1241.07 1237.81
27-Jun-19 1402.25 1402.50, 1103.71 1105.87 & 1233.14 1234.76
26-Jun-19 1406.75 1403.95, 1109.22 1106.73 & 1238.501236.32
25-Jun-19 1429.55 1431.40, 1120.62 1124.36 & 1255.72 1256.20


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Mark O'Byrne

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