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Gold Prices Start Q2 With Push Above $1,200 Following Weaker U.S. Data

By Neils Christensen of Kitco News
Wednesday April 1, 2015 11:02 AM

(Kitco News) - Two weaker-than-expected economic reports Wednesday has helped gold start the second quarter off on a strong footing, pushing prices briefly above $1,200 an ounce.

Wednesday, Comex June gold futures rallied to a session high of $1,203.60 an ounce. Although prices have backed down slightly they are still holding on to recent gains, last trading at $1,199.10 an ounce, up more than 1% on the day.

“The market need to close above $1,200 to create some momentum,” said George Gero, vice president and precious-metals strategist for RBC Capital Markets Global Futures.

Gold’s rally started early in the session after private payrolls processor ADP said that 189,000 jobs were created in March, well below the consensus of 225,000 jobs. According to the report, this was the weakest pace of job growth since January 2014.

Gold got a second push, driving prices above $1,200 an ounce, following disappointing manufacturing data from the Institute for Supply Management (ISM).

ISM said its Purchasing Managers Index showed a reading of 51.2% in March, below the consensus of 52.5%. The data shows that the manufacturing sector has been steadily losing momentum since the start of the year.

Gero added that the data pushed back expectations of when the Federal Reserve will hike rates, with more focus now on a September liftoff.

John Weyer, co-director of commercial hedging at Walsh Trading, agreed that this data raises doubt about a June rate hike.

“It is amazing how quickly things can change from report to report,” he said. “There is a lot more focus on the data and the general consensus I think is switching to a September rate hike because of the weak data,” he said.

Although the ADP employment numbers are not always considered a major market mover, this month is different since the U.S. government will be releasing nonfarm payrolls data on Friday but markets are closed in recognition of Good Friday. Weyer said that today’s ADP report is the only chance traders have to adjust their expectations of the labor market.

Although $1,200 will be an important level to watch, Weyer said that they are looking for a close above last week’s highs of $1,220 to $1,225 an ounce.

Ted Sloup, senior market strategist at iiTrader, said that the key resistance point he is watching is $1,205, which he added is a key Fibonacci retracement level.

“If we are able to close above that then we could see prices push to $1,245 or $1,250 an ounce in the short-term,” he said.

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By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow Neils Christensen @neils_C



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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