EDITOR'S NOTE: Don't Miss a Beat! Sign-up for the Kitco News Weekly Roundup – our newsletter highlighting our most popular features, articles and videos! Register Here

Comex Gold Dips Below $1,200 First Time This Year As Dollar, Stocks Rise After Jobs Report

By Allen Sykora of Kitco News
Friday October 3, 2014 10:18 PM

(Kitco News) - Gold futures slipped below the $1,200-an-ounce level for the first time in 2014 on Friday as the U.S. dollar and equities rose in the wake of a stronger-than-forecast U.S. jobs report.

Still, at least for now, the yellow metal is showing some resiliency, with losses limited since the time the government actually released the report, with traders and analysts citing short covering and a hesitancy to push prices down too aggressively ahead of a weekend.

The metal had a softer tone going into the jobs report, with gold for December delivery at $1,207.30 an ounce two minutes ahead of time. The contract then dipped as far as $1,193.70. It was trading at $1,194.70 an ounce as of 10:07 a.m. EDT, a loss of $20.40 for the day.

December silver was down 20.2 cents to $16.845 an ounce, compared to $17.045 just ahead of the report.

“It’s repetition to what’s been happening (in recent weeks) – strong dollar, strong stocks, weak gold,” said George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures.

The Labor Department reported that nonfarm payrolls rose by 248,000 in September. Expectations compiled by various news organizations were for around 205,000 to 220,000 new jobs. Additionally, nonfarm payrolls for July and August were revised upward by a combined 69,000. Labor also said the jobless rate fell to a six-year low of 5.9%, when economists had been looking for it to hold at 6.1%.

“The underlying strength in the economy is continuing despite the fact that some of the other data this week – the ISM (Institute for Supply Management manufacturing survey) and other leading indicators – have been a bit softer than expected,” said Robin Bhar, metals analyst with Societe Generale. “This has put to rest some of the doubt and shows the economy is clearly maintaining its strength. It’s creating jobs. The unemployment rate is falling. Everything that we’re being told about the economy getting healthier all of the time seems to be reflected in the data. As a result, the dollar has strengthened.”

The euro fell to a low of $1.25102 against the U.S. dollar, its wimpiest level against the greenback in two years. The Dow Jones Industrial Average gaining around 166 points.

The yield on U.S. 10-year Treasury notes rose to 2.474% from 2.438% late Thursday.

Afshin Nabavi, head of trading with MKS (Switzerland) SA, noted that some key Asian buying nations, including China, are sidelined for holidays. When they come back next week, this might mean more physical buying interest, he added.

“You’re not seeing any real bounce (in gold),” Nabavi said. “It’s up a couple of dollars from the lows. It feels a little heavy.”    

Related Stories:

Still, while lower, the metal has not gone into a complete freefall either compared to just where it was ahead of the data.

“On Friday, you do see short covering coming through,” Bhar said. This is when traders buy to offset positions in which they previously sold.

Some traders may be somewhat cautious on the downside, he added, “maybe not wanting to be exposed over the weekend with the political unrest in Hong Kong and some of the other flash points. Any further downside tests may wait until next week.”

There also might be some hesitation until traders see what the Federal Open Market Committee signals at its next monetary policy meeting later this month.

“The unknown is what sort of stops are in the market,” Bhar said. These are pre-placed orders triggered when certain price points are hit, either to capture a profit, exit a losing trade or establish a new one. “We presume there would have been some at $1,200, which would have been triggered.”

Further, he said, some physical demand can be expected at lower levels, especially on a breach of a major round number such as $1,200.

Gero commented that much of the recent selling has been long liquidation by futures traders, in which they were bailing out of their bullish bets. Much of this selling may now have run its course, he continued.

“So if anything, perhaps we’re going to start to see some bargain hunting, if the market steadies up next week,” Gero said.

“It’s the beginning of the new quarter. Hopefully with a lower tax in India (should one be passed), better coin sales that we’ve just seen and good holiday demand for jewelry that is priced better, we may yet see higher prices down the pike,” Gero said. There is also the potential for geopolitical events to influence the market in the coming weeks, he added.

By Allen Sykora of Kitco News; asykora@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.
kitco news

Precious Metal Charts

Click to see this Precious Metal chart
  1. 24h
  2. 30D
  3. 60D
  4. 6M
  5. 1Y

Interactive Chart