GOLD MOVED in a $4 range early Friday, reaching lunchtime in London little changed from Thursday's sell-off at $649.50 per ounce.
'As the metal continually fails to make its mark above the 100-day moving average,' says the latest technical analysis from Standard Bank in Johannesburg, 'it should remain under pressure in the near term.
'Momentary support should exist in front of $645 and the key 200-day moving average, currently around $643.'
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
On the currency markets, the Dollar continued to push back Sterling and Euros following Thursday's much-stronger than expected US employment data from the ADP consultancy.
Showing a gain of 150,000 jobs against 97,000 forecast, the ADP report was followed today by June's official non-farm payrolls number. It showed a gain of 132,000 against 120,000 forecast by Wall Street.
'A lot of people were waiting for lower US interest rates in the gold market,' says Michael Widmer, head of metals research at Calyon in London. But after the latest jobs data, 'it doesn't seem as if the Fed will pull that off in the next few weeks. So it's tough to take a bullish position on gold.'
Bond investors were also hurt by the jobs data, with US Treasuries heading for their largest week-on-week drop in a month according to Bloomberg. The 10-year yield has risen 12 points as bond prices have dropped, hitting 5.14% just ahead of Friday's New York open.
Those higher rates encouraged fresh Dollar buying on the currency markets, where Sterling fell below $2.0070 despite strong industrial production numbers that appeared to justify Thursday's decision to raise Bank of England lending rates to a six-year high.
The Euro also fell, dropping as low as $1.3570 mid-morning. That helped keep the Euro price of gold above €476.50 per ounce. But Widmer at Calyon notes that the correlation coefficient between gold and the Euro now stands at 0.94 for this month so far, up from 0.50 in June.
A reading of 1.0 would mean gold and the Euro moving in perfect lock-step.
'It looks like that $650 level is back to haunt us again,' writes Phil Smith for Reuters Technical in India, 'with the market stuck around there yet again after bouncing off the upper channel of its current downtrend.'
In the physical bullion market, the German refining giant Heraeus says that 'traders reported this week from various countries including Indonesia, India, China and Germany that despite the recent drop in price, the interest by retail customers, be it for physical investment metal or for jewelry, remains down.'
Looking ahead, however, the current lull in physical gold demand particularly in India and China may soon be reversed.
'Good rains forebode a good harvest that will boost agricultural income, helping farmers to buy more gold this year,' reckons James Steel, metals analyst at HSBC and Mumbai's Met. Office reports June rainfall was 7% above average.
India's gold demand accounted for one ounce in every five sold anywhere in the world last year. It may be set to hoover up physical gold from the international market once again after August, driven by a slew of festivals and the post-harvest wedding season.
'We look at gold as a barometer of wealth in the world,' said Jason Mraz, head trader at Ospraie Management the New York hedge fund running $7 billion in commodities and basic industries at the Commodity Investment Summit in London last week. 'The underpinning of demand is very strong.'
'Most commodities in China still look extremely bullish, and China's influence looks fairly positive,' adds Adam Rowley, a commodities analyst with Macquarie Bank in London. 'On trend, we would see China as an unstoppable force in these markets.'
Adrian Ash is editor of Gold News and head of research at www.BullionVault.com, the fastest growing gold bullion service online
-
Side hustle tax changes: HMRC reforms could save thousands from filing self-assessment tax returnsThe government plans to raise the tax-free threshold for trading income – here is how it could help your side hustle
-
Return to the office: is working from home coming to an end?More and more employers want their staff to return to the office. Is it a good idea?
-
Gold regains some of its shineNews The gold price perked up this week, hitting a four-week high.
-
Gold regains its shine after inflation risks resurfaceAnalysis Gold prices have been rising over the past month as fears of US inflation resurface. Saloni Sardana explains whether this could usher in a new bullish era for the precious metal.
-
The going looks good for goldAdvice With inflation fears rising and interest rates nailed to the floor, the outlook for gold is bright, says John Stepek.
-
Mark Mobius: “I love gold”Features Mark Mobius, perhaps the best-known emerging markets investor in the world, reckons that gold should form at least 10% of any investor’s portfolio. And now is a good time to buy.
-
Gold is poised for a new bull marketFeatures The price of golf has hit a six-year high, breaching the $1,400 an ounce level not seen since August 2013.
-
Why you need to own goldTutorials All the talk of Modern Monetary Theory misses one key point, says Eoin Treacy. We’re already well down the road of printing money to fund government spending.
-
Fed interest-rate rises won’t hold the gold price backFeatures Some analysts worry that higher US interest rates are bearish for gold. But the evidence doesn’t bear this out.
-
The weak US dollar trade is still on – stick with goldFeatures With little chance of higher US interest rates in the near future, the weak dollar trade is still on. John Stepek explains why, and the best way to profit.
