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Metals Stocks: Gold down 2%, loses grip on $1,900 level as dollar rises after jump in U.S. private-sector jobs

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Gold surrendered a key technical level on Thursday, with prices facing the biggest daily drop in almost a month ahead of U.S. jobs data.

Gold for August delivery
GCQ21,
-1.92%

fell 0.8%, or $15, to $1,894.90 an ounce after settling at $1,909.90 on Wednesday. If weakness continues, the August contract could settle under the key technical level of $1,900 an ounce for the first time in five sessions. Before last week, the last time gold settled above $1,900 was in January.

“Following the strong run up since April, gold’s ability to withstand correction/consolidation pressures highlights the return to the buy side of long-term trend following funds, many of which build up short positions following the August peak,” said Ole Hansen, head of commodity strategy at Saxo Bank, in emailed comments.

“Still the risk of a deeper correction remains in our opinion the biggest short-term risk,” Hansen added. He cited support for gold at $1890, $1,865, then $1,842, with resistance at $1,916, $1,924 and $1,940.

With gold’s losses came U.S. dollar gains, as the ICE U.S. Dollar Index
DXY,
+0.55%

rose 0.1%. A stronger dollar can make assets priced in the currency such as gold less attractive to overseas buyers. U.S. stock futures pointed to a weaker start for Wall Street with Dow futures
YM00,
-0.32%

down 200 points.

July silver 
SIN21,
-3.26%
,
 meanwhile, fell 23 cents, or 1.2%, to $27.85 an ounce.

Investors are waiting on several economic updates, including the ADP estimate of private-sector payrolls for May, which comes a day ahead of all-important May nonfarm payrolls from the U.S. Labor Department. As well, the Institute for Supply Management will report on the services sector purchasing managers index.

Gold had moved higher in electronic trading on Wednesday after the release of Federal Reserve’s Beige Book, which indicated inflationary pressures are still building.

Viewed as a traditional hedge against inflation, gold and other precious metals have been on a trek higher amid investor worries about inflation and how the Fed might respond. The U.S. economy, in particular, has come roaring back from the pandemic, but with signs of inflation building.

On Wednesday, Philadelphia Fed President Patrick Harker said that it was time to start thinking about discussing the time frame for scaling back the Fed’s $120 billion a month asset-purchase program. That’s as the Federal Reserve said Thursday it will sell its corporate bond portfolio acquired during the pandemic.

Among other metals, July copper 
HGN21,
-2.44%

 shed 0.7% to $4.557 a pound. July platinum 
PLN21,
-3.29%

lost 0.5% to $1,186.30 an ounce, and September palladium 
PAU21,
-1.57%

 fell 0.8% to $2,845 an ounce.

Economic Report: U.S. gains 978,000 private sector jobs in May, ADP says

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