Gold on pause: Another week of minimal price action. In the past seven days gold has barely budged US$25 per ounce. The week started strong with gold breaking above that downtrend line.
Yet…Au hugs US$1,750 ahead of payroll data on Friday night: US Nonfarm payroll data will be released on Friday night. Good data — the kind that favours more people being employed — could push gold lower.
- Why? Because the more positive the news is for the US economy, the more certain the market becomes the Federal Reserve Bank will start to reduce tapering.
- The US dollar remains at a one year high, further damping any enthusiasm for gold.
- Managing partner at SPI asset Management Stephen Innes said: ‘If we get a strong employment number and US yields move towards 1.6%, gold could trade down to $1,725.’
Estimates vary for Nonfarm payrolls: There doesn’t appear to be a consensus on what to expect in the September Nonfarm payrolls, with estimates varying from 525,000 to 700,000. TD Securities is at the lower end, Morgan Stanley at the higher end and Goldman in the middle of the two. Either way, we’ll know more tonight.
US bonds go up…again: US bond yields rose this week. Again. The market holds the view that soon-to-begin tapering is ‘baked in’ and expecting a slowdown in monetary expansion in the US.
Market re-asses Fed’s views: From the Sprott Monthly Report:
‘Rather than fear the [Federal Reserve Bank’s] tapering message, markets took it to signal that the macro-economic environment was becoming healthy enough to get by without additional government assistance. That notion further weakened interest in gold as summer gave way to fall in the third week of September…’
Bulls, it comes down to the currency you’re buying with this week: In US dollar terms, gold is stuck around a key price level. Au looks to have broken above that downtrend line from last week. If you’re buying gold with Australian dollars, then this is your moment.
Nonfarm payroll data may encourage the bears: Strong employment numbers may see gold get pushed down to near the September lows, which is around US$1,725.00 per ounce.
Gold to silver ratio now favours silver: The gold to silver ratio (often just written as gold:silver) has sold off slightly from last week, but is holding steady at 78 today. The higher the ratio, the ‘cheaper’ silver looks compared to gold.
Australian investors, ready yourselves to buy gold: The Australian dollar has strengthened overnight despite the Reserve Bank of Australia’s slightly dovish tone earlier in the week. With the Aussie dollar rising to 73.20 US cents overnight, the Australian dollar gold price has fallen below US$2,400. In recent weeks we’ve seen many ABC Bullion client’s take advantage of gold dipping and using this as an opportunity to top up their gold positions.