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Debbie Carlson

METALS OUTLOOK: Gold Market Awaiting Data In Holiday-Shortened Week

By Debbie Carlson of Kitco News
Friday August 30, 2013 2:03 PM

(Kitco News) - Economic data will help determine price direction for the gold market next week, with market participants awaiting the critical monthly nonfarm payrolls data.

Traders will also keep an eye on the Middle East to see if tensions flare up over the situation in Syria.

December gold futures fell Friday, settling at $1,396.10 an ounce on the Comex division of the New York Mercantile Exchange, up 0.02% on the week and up 6.3% on the month. December silver fell Friday, settling at $23.513 an ounce, down 0.95% on the week, but up 19.5% on the month.

U.S. markets are closed Monday for the Labor Day holiday and resume trade Tuesday.

In the Kitco News Gold Survey, out of 36 participants, 22 responded this week. Of those 22 participants, 11 see prices up, while nine see prices down and two see prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

Gold prices rallied to their highest level since mid-May this week, to $1,434, supported by safe-haven buying on concerns of an imminent military strike on Syria by the U.S. and its allies, following suspicions that the government there used chemical weapons on rebel fighters as part of the two-year civil war.

Values came off their highs on profit-taking Friday when the U.K. Parliament voted against military action. Several analysts said traders opted to take some money off the table ahead of the three-day weekend, too.

Trade may be light to start next week as some traders may seek to extend the Labor Day holiday; additionally, market participants may be squaring up positions ahead of the key August non-farm payrolls report, set for release Friday.

Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA, said he’s expecting a slow start to September.

"It will be quiet until you get non-farm payrolls next Friday," Nabavi said. He suggested gold may be in a range of $1,385 to $1,425, especially if there is no military action against Syria.

The jobs report is always an important factor for financial markets, but this month’s report will have added significance because it is the last employment report before the September Federal Open Market Committee meeting. Given the uneven economic reports as of late, traders will be looking ahead to the report to give them a better sense of whether they believe the Federal Reserve will announce a possible tapering of its bond-buying program, known as quantitative easing, at the FOMC meeting on Sept. 17-18.

In July, the U.S. Labor Department said 162,000 jobs were created. Nomura economists noted that labor market data released since then have been mixed. They estimate that payrolls will show a rise of 160,000 in August, with the unemployment rate holding 7.4%.

Economic reports and events also worth watching are the August purchasing manager index reports from China, the eurozone and the U.S., along with interest-rate decisions from the Bank of Japan, the Bank of England and the European Central Bank.

Daniel Pavilonis, senior commodities broker with RJO Futures, said if the jobs data comes in line with expectations, he believes it might lend credence to the notion that the Fed might lean toward announcing a tapering of QE.

“The Chicago PMI was good, the sequester is helping out, tax revenue is rising. If long-term rates do start rising, that’s going to help out savers. I don’t think rising rates are really having a major impact on housing,” he said.

Based on that, Pavilonis said he sees gold prices weaker next week.

Andrew Busch, founder and editor of The Busch Update, is also in the camp of the Fed tapering in September.

“The U.S. economy is growing fast enough to produce a drop in the unemployment rate that is forcing the Fed to talk about tapering,” he said, adding that “even with the threat of a wider Middle East war and sharply higher oil prices, the markets could only push down U.S. yields to 2.70%ish on a flight-to-safety run.”

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By Debbie Carlson dcarlson@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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