Gold and silver futures prices ended the U.S. day session solidly lower Thursday, with both markets hitting four-month lows. A rallying U.S. dollar index and upbeat U.S. economic data this week continue to produce selling in the precious metals markets. December Comex gold was last down $13.90 an ounce at $1,254.70. December Comex silver was last down $0.032 at $17.375 an ounce.
Traders and investors are now awaiting Friday’s U.S. jobs report from the Labor Department, which is arguably the most important economic report of the month. The key non-farm payrolls number is expected to be up by 170,000 in September. Look for active markets in the aftermath of the jobs report, especially if it is a miss from market expectations. An upbeat U.S. jobs report Friday would strongly bolster the case for the Federal Reserve raising interest rates yet this year. However, a miss to the downside on non-farm payrolls would be just what the precious metals bulls need to stop their bleeding.
Some analysts think gold prices will bounce back on bargain-hunting physical demand, as holidays in India are just around the corner. India and China are the world’s largest gold buyers.
WGC said “Following a remarkable performance year-to-date, the gold price fell by over 3% on 4 October, which we believe will likely result in physical buying.”
”The move seems to have been driven by speculation of a scaling back in the ECBs asset purchase programme, combined with rising expectations of a US rate hike in December. The fall triggered stop-losses and further tactical selling. ”
”We believe that a shift in monetary policy need not signal lower gold prices. The price dip will likely result in physical demand from consumers, long term investors and central banks. In addition, the broader market environment of ongoing low and negative interest rates, coupled with continuing political, economic and policy uncertainty remains unchanged, and are generally positive for gold.”
Gold just dropped below its 200-day moving average -- a key technical level often used by chart watchers to predict future moves -- for the first time since February. Prices lost at least 7 percent within about two months on two occasions when the metal fell below the measure in2014 and 2015. A slump below the moving average may mean this year’s uptrend is over, said Georgette Boele, a currency and commodity strategist at ABN Amro Bank NV in Amsterdam.
The recent price weakness in gold may well be the catalyst that triggers fresh buying in the physical market, says Commerzbank. Comex December gold on Wednesday bottomed at $1,264.10, its weakest level since late June. “However, buyers will probably be lured in by the lower price level, in our opinion,” Commerzbank says. “Because markets in China are closed for public holidays this week, one major purchaser is missing at present, though. India appears to have already imported more gold again in September.” Analysts cite preliminary data from the country’s Ministry of Finance showing gold imports totaled 44.6 tonnes, significantly more than in the previous months. “With the festival season and the religious holidays of Diwali and Dussehra just around the corner, not to mention the subsequent wedding season, India should also import larger quantities of gold again in the coming months,” Commerzbank says. “In this context, it will no doubt help that the gold price in Indian rupees has likewise fallen of late.”
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