The gold price staged a minor recovery on Thursday as the price moved up while stocks took a fall, all in anticipation of the key U.S. nonfarm jobs report due on the 7th of August.
After settling at $1,086.60 an ounce on Wednesday, gold rallied on Thursday as gold futures for December delivery (GCZ5, -0.41%) registered an increase of $7.10 to trade at $1,092.60 per ounce.
The gold price also benefitted from a slight fall in the U.S. dollar (USD) which indicates how sensitive the gold market is to dollar values. Any changes in fundamentals that might add to the dollar strength would thus have a negative impact on the gold price.
The rise in the gold price appears to have been at the expense of stocks as negative investor sentiment pushed media shares, such as Walt Disney Co. (DIS, -3.65%) and Viacom Inc. (VIA, -13.88%), down on the back of fears for the future of the cable and pay-TV industry.
The jobs report due on Friday is a very important factor that will have a strong bearing on gold and share prices as well as on the U.S. dollar value and this will be closely watched by Fed officials, analysts and investors alike. The impact of the dollar value on commodities in general is also indicated by the fact that there was a minor rally in platinum, silver and copper prices on Thursday.
An article by Kitco on Thursday suggests that should the nonfarm payroll new jobs figure come in at anything over 215,000, this would be sufficient to encourage the Fed to implement a rates hike in September. A figure of less than 215,000 would most likely postpone any hike until December at the earliest.
HSBC Chief U.S. economist Kevin Logan cites news that the government estimates for U.S. economic growth for the last few years have been cut following the annual benchmark revision. The disappointing data raises questions about the economy’s underlying trend rate of growth, and whether the timing is right for a rates move by the Fed.
Precious metals analyst Jim Street says any delay in a rates hike may remove some of the near term pressure on gold while Bloomberg data shows a 50/50 chance of a September increase in the interest rate.
A MarketWatch report quotes investment strategist Peter Grandich who has the view that a strong nonfarm payrolls report could spark a downward move of up to $100 in the price of the precious yellow metal.
Grandich said, “A break below the pennant and it’s a near certainty [in my humble opinion] we see a test of the critical $1,000 area. Given how incredibly bearish and overcrowded the bearish camp is at the moment, I think such a test would fail and a break below $1000 would follow.”