By Mr. Prithviraj Kothari, MD, RSBL
Positive data or negative?
Hike rate this year or next?
Strong dollar or weak?
Stable equities or volatile?
Gold up or down?
Well a lot was expected to happen this
week. Precisely, the above mentioned questions are somewhere down the line
related to each other.
A positive data strengthens the dollar
thus increasing the chances of rate hike which would push gold prices down. And
even vice a versa.
Till mid-week, majority of the market
participants believed that the data due to be released on Thursday and Friday
would come in as a surprise package for all. Gold eased on Wednesday, staying
on track for its biggest quarterly loss in a year as the dollar strengthened
and the market awaited clarity on the timing of a hotly anticipated U.S.
interest rate rise.
The spot gold price was seen at
$1,112.90/1,113.10 per ounce, down $2.30 on Wednesday’s close and its lowest in
around two weeks. Gold was stable on Thursday afternoon in London following the
release of mixed US data and ahead of tomorrow’s blockbuster US jobs report.
- On Thursday, US weekly
unemployment claims came in at 277,000 under the psychological 300,000
mark.
- During the third quarter,
205,759 jobs were shed, the largest figure since the third quarter of
2009.
- US PMI came in as expected at 53.1 and construction spending slightly better than forecast at 0.7 percent.
Now that the unemployment’s claims and
PMI data was out, markets shifted focus the significant US non-farm payrolls
data slated for release on Friday. The tables for gold turned once the report
was out:
- Non-farm
payrolls in August sank to 173,000, the first sub-200,000 reading since
April.
- The
US economy added 142,000 jobs in September, below the forecast of 201,000,
and the August figure was revised down to 136,000 from 173,000.
- The
only positive news coming in was that unemployment rate was unchanged at
5.1per cent.
- The
labor participation rate fell to the lowest level since October 1977 at
62.4 percent, while wage growth was flat.
The yellow metal prices augmented on
the release of lower than expected US data, nearly erasing the losses accrued
in five consecutive negative sessions.
Physical demand and volatility did not
come in much from the Asian markets as the Chinese markets are closed for
Golden Week holidays and will reopen on October 8 and the Indian market too was
closed on 2nd October.
The disappointing non-farm employment
change has taken the market by surprise and the reaction has been quite strong
such that there are strong sentiments that a chance of increase in interest
rates not happen this year thus declining some of the concerns that higher US
rates would have a negative impact on emerging markets.
Investors were considering for
indications on the timing of the US rate rise. With two Fed meetings now left
before 2016, markets now believe that the rate hike won’t happen this year. But there are some who believe that the
Fed may announce a rate hike in its last meeting of 2015 due in December.
The primary purpose of this article by
Mr. Prithviraj Kothari is to educate the masses of the current happenings in
the Bullion world.
- Previous blog-
"Gold Directionless- RSBL"
