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A.M. Kitco Metals Roundup: Gold Sells Off Sharply on Stronger U.S. Jobs Data, Soaring U.S. Dollar Index

Friday July 5, 2013 9:00 AM

(Kitco News) - Gold prices dropped sharply in the immediate aftermath of a U.S. employment report for June that showed better-than-expected jobs growth, including upward revisions for jobs in April and May. The U.S. dollar index pushed to a three-year high on the jobs data, which also helped sink the gold and silver markets. August gold was last down $32.10 at $1,219.80 an ounce. Spot gold was last quoted down $31.60 at $1,221.40. September Comex silver last traded down $0.679 at $19.01 an ounce.

The U.S. Labor Department reported non-farm payrolls increased by 195,000 in June, which was significantly better than the 160,000 rise expected by the market place. The overall unemployment rate was unchanged from May, at 7.6%. The upward non-farm job revisions in April and May totaled around 70,000 for both.

The improving U.S. labor market lent additional weight to the hawkish camp of Fed watchers who think the Federal Reserve will start to back off on its quantitative easing of monetary policy (so-called “tapering”) as soon as later this year. That is seen as at least initially commodity-market bearish, including the precious metals. The very easy money policies of the major central banks of the world have boosted raw commodity prices in recent years.

The market place is also anxiously watching developments in Egypt. Crude oil prices have risen Friday on news that a state of emergency has been declared in the Suez and South Sinai provinces of Egypt. Reports said there was an Islamist attack at the Arish Airport. While reports said the Suez Canal is operating normally, any disruption of one of the world’s most important major world waterways would be very market-sensitive. Earlier this week the Egyptian military overthrew the sitting president and installed its own temporary leader. Any escalation of violence in Egypt or the Middle East could prompt fresh safe-haven demand for gold.

European stocks were narrowly mixed early Friday as the U.S. jobs report was awaited. Traders are still digesting the somewhat surprising news from the European Central Bank and the Bank of England Thursday, in which both gave forward guidance and said they would keep interest rates low for the foreseeable future. The market place perceived central banks’ statements to be firmly on dovish side. The Euro currency has seen selling pressure following the ECB meeting.

The London A.M. gold fix is $1,232.75 versus the previous London P.M. fixing of $1,251.75.

Technically, the gold market bears remain in near-term technical command. August gold futures prices are still in an eight-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price objective is to produce a close above technical resistance at $1,300.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at last week’s low of $1,179.40. First resistance is seen at this week’s high of $1,267.00 and then at $1,275.00. First support is seen at Friday’s low of $1,215.90 and then at $1,200.00.

Silver bears have the solid overall near-term technical advantage. Prices are in an overall eight-month-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $21.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of $18.17. First resistance is seen at $19.50 and then at the overnight high of $19.83. Next support is seen at the overnight low of $18.81 and then at $18.50.

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By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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