Gold jumps on dollar slide, slow U.S. labor market recovery
· Gold jumped as much as 2.5% on Thursday, rebounding from a near three-week low hit in the last session, as the dollar dipped and a slow recovery in the U.S. labor market reinforced the economic toll from the coronavirus pandemic.
· Spot gold rose 1.9% to $1,954.37 per ounce, having slipped below $1,900 on Wednesday. U.S. gold futures settled up 1.1% to $1,970.40.
· U.S. jobless claims dropped below one million last week for the first time since the start of the pandemic, though at least 28 million people are still receiving unemployment checks, indicating a weak labor market. “The dollar has been quite weak ... this recovery we’ve had (in the labor market) has been the low-hanging fruit. It’s an easy bounce,” said Edward Meir, analyst at ED&F Man Capital Markets.
· “The initial claims are still running at a very high rate, and there is still a long way to go,” Meir said.
The dollar was down 0.4% against rivals, bolstering gold’s appeal for those holding other currencies, as Washington continues to remain in a stalemate over additional stimulus.
· Adding to the gloomy outlook, Federal Reserve policymakers warned U.S. growth would be muted until the coronavirus was contained.
· Investors are now eyeing a meeting between the United States and China on Aug. 15.
· “The underlying factors in the market have not changed significantly. The fact that gold did not move still higher when Sino-U.S. tensions escalated over the weekend signalled that most of the tailwinds were priced in,” said StoneX analyst Rhona O’Connell in a note.
“Investor sentiment remains robust overall.”
· CME Group sees record precious metals volumes during Tuesday's gold, silver price drops
When gold and silver prices were seeing their steep price pullbacks on Tuesday, CME’s precious metals platform recorded new all-time high volumes. “Precious Metals markets reached a record average daily volume (ADV) of 1.55 million contracts on August 11, surpassing the previous record of 1.51 million set February 28, 2020,” CME Group said in a press release Wednesday. “A record 397,000 Silver futures contracts were traded on August 11, 2020, surpassing the prior record of 329,000 set on August 7, 2020.” Overall, August has seen very high trading levels, noted the CME Group managing director Young-Jin Chang. “We have seen record volumes through the month of August and continue to focus on providing our global client base with the tools they need to mitigate risk going forward.”
· 'Last great buying opportunity': Gold price can dip below $1,700 this year before resuming its path towards $15K - Goehring & Rozencwajg Associates
After taking a major step back from its massive summer rally with a temporary drop below $1,900 an ounce on Tuesday, gold attempted to recover. But the price pullback might not be over, according to Goehring & Rozencwajg Associates managing partner Leigh Goehring, who is not ruling out seeing $1,500-$1,700 levels this year.
A corrective pullback was widely expected as gold prices rose incredibly fast in a very short period of time. The precious metal managed to breach its 2011-high of $1,920 an ounce, rise above $2,000 and make new record highs above $2,050 an ounce all in under three weeks.
The price correction seems to have some weight behind it and gold could retreat as far as $1,700 or even $1,500 this year before reversing and hitting new record highs above $2,000 an ounce.
“Based on our research, gold often trades at a certain relative size to the Federal Reserve’s balance sheet. Using this type of analysis — the amount of gold outstanding, specifically how much gold the U.S. government holds, relative to the size of Federal Reserve’s balance sheet, you can get anywhere between $10,000-$20,000,” Goehring explained. “Our target is between $10,000-$15,000. That will happen at the end part of this coming decade — 2027-28.”
One of the major drivers to take gold there will be inflation, according to Goehring.
· Elsewhere, silver rose 4.6% to $26.73 per ounce, platinum gained 2.6% to $955.50 and palladium climbed 1.9% to $2,172.68.
Reference: CNBC, Kitco
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