Gold Down Ahead of Jobs Report Posted by James Randolph on July 06, 2012
July 6, 2012 – The price of gold move downward on Friday while a firmer dollar weakened European demand for the precious metal and while market watchers and participants anticipated the US jobs report as an important indicator as to the health of the US economy.
The US private unemployment data, which was released on Thursday, provided figures that beat expectations and may be a prelude to a better than expected non-farm payroll report on Friday. Generally, strong employment data is perceived as a harbinger of a slower gold market because it decreases the likelihood of further fiscal stimulus from central banks, which has been one of the strongest drivers of gold for many years.
The spot price of gold is down to $1,594.96 per troy ounce from $1,604.33 as of the close on Thursday and looks to be moving towards a fall for the week of 0.2 percent.
“I would certainly highlight yesterday’s ADP (private sector employment) number. If that means we’re going to get good non-farm payrolls this afternoon, the likelihood of (a third round of US) quantitative easing diminishes significantly, which is very bad for gold,” Natixis analyst Nic Brown said.
The monetary stimulus of central banks has the general effect of devaluing currency because they are actually putting more money into the market, and the decreased value in currency heightens both the value and the demand for gold.
US gold futures contracts for August delivery moved down 0.85 percent to $1,595.50.
They remained at five-week highs against the euro, which is a reflection of the expectation that the European Central Bank might have followed its rate cut on Thursday with broader easing measures.
The ECB rate cut was announced just after similar actions by Chinese and UK central banks also announced rate cuts, which could be taken as an overall indicator to the health of the global economy.
Thursday’s data showed US private employers increased hiring in June and the amount of Americans bringing new claims for jobless benefits fell last week the most it has in two months, all good signs for a labor market that has seen a lot of struggle.
A poll conducted by Reuters indicated non-farm payrolls were expected to grow by only 90,000, far below numbers necessary, in June.