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Neils Christensen

Gold To Be Volatile In Big Data Week Ending With Nonfarm Payrolls – Analysts

By Neils Christensen of Kitco News
Friday January 30, 2015 4:23 PM

(Kitco News) - Gold prices surged higher in the North American session late Friday to end the week in modestly negative territory. Analysts said they are expecting more volatility as markets adjust to U.S. monetary policy expectations and geopolitical uncertainty.

Comex floor trading of April gold futures settled the week at $1,279.20 an ounce, down $14.80 or by slightly more than 1%. Although prices ended the week in negative territory, prices recovered sharply after a 2% drop on Thursday.

Comex March silver futures were not able to recover as much as gold, with prices settling the week more than 5% lower at $17.208 an ounce, down $1.092.

Analysts noted that gold saw strong selling pressure earlier in the week as investors interpreted the Federal Open Market Committee meeting as hawkish, expecting the central bank to hike rates sometime in the second half of the year.

Bart Melek, head of commodity trading at TD Securities, said he is expecting to see similar moves next week as markets try to judge future monetary policies from major economic data being released next week.

“We are getting some important data on the manufacturing sector and then the nonfarm payrolls on Friday. If the data is better than expected, then gold will suffer because markets will think the Fed is hiking rates. If the data is weaker than expected, gold will do well,” he said.

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The week starts with the Institute of Supply Management’s Manufacturing Purchasing Managers’ Index, then personal income and spending numbers for December, and finally ending with the always-important nonfarm payrolls data for January.

Bernard Dahdah, precious metals analyst at Natixis, said that he is waiting to see what the employment numbers are going to be because that will have the biggest impact on U.S. monetary policy expectations.

Analysts from Nomura said in their weekly outlook report that, along with the employment numbers, they will also be paying close attention to the wage data. In December, wages actually dropped in the U.S. The analysts said that an increase in wages in January will demonstrate that economic slack is falling.

“We forecast that average hourly earnings for private employees rose by 0.3%, representing some rebound from the sizable decline in December,” they said.

George Gero, vice president with RBC Capital Markets Global Futures, said that on a technical basis, gold still has momentum as it holds above $1,250 an ounce but in the current “wait-and-see” marketplace, “more bears are in the woods.”

Ole Hansen, head of commodity strategy at Saxo Bank, said the U.S. data and nonfarm payrolls numbers will play an important role for gold next week, but also reminds investors to keep an eye on what is happening in Europe.

Fears that Europe could fall apart because of Greece and negative government bond yields are helping to support the gold market.

“Yes we’ve had a week of consolidation, but gold is still out in front compared to other commodities,” he said. “Negative bond yields are making gold an attractive investment; opportunity costs for gold are gone as it is once again being seen as an alternative asset.”

By Neils Christensen nchristensen@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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