Gold prices are under a lot of pressure on Friday to end the week. After making what appeared to be a meaningful reversal last Friday off of the overnight lows, the gold market was showing some signs of life this past week. Many had thought that maybe, just maybe, the bottom was in-at least for now. Well, the bulls are likely quite frustrated today as once again the price of gold is under duress following today’s release of the June non-farm payrolls report by the U.S. Department of Labor.
The jobs report showed that the U.S. added 195,000 jobs in the month of June while the unemployment rate held steady. In addition,past months saw revisions that showed that more jobs were created than originally thought. The stock market,which was already being bid, cheered on the data initially before selling off to the unchanged mark and then recovering and posting gains again. The gold market however, was not so fortunate and took the news on the chin. Spot gold prices tumbled as the U.S. dollar index soared to its highest level in three years.
The dollar was already getting a boost following central bank news on Thursday. While U.S. markets were closed for the 4th of July holiday, the European Central Bank as well as the Bank of England made policy announcements. Both of these key central banks remain committed to holding rates at very low levels for the foreseeable future, and in fact would consider additional easing measures if necessary. This sent the Euro currency and the Pound lower. Today’s U.S. data only added fuel to the fire as far as the greenback is concerned.
This report today may very well now end the ongoing debate about when the Fed may begin to taper and by how much. As we have noted, the data stream continues to show improvement, and with the jobs market perhaps starting to gain some steam now as well, the stage is set for the Fed to begin winding its stimulus down. We could see this process beginning now as quickly as September. Interest rates spiked today as well, and gold now finds itself once again in a bind with seemingly no catalyst to drive prices higher.
We all know that this can turn on a dime however, and markets will continue to monitor the situation in Egypt very closely. Even with the potential for escalation in Egypt however, gold may have a hard time stabilizing until a true bottom is put in and it is still too early to tell if that has occurred already or if a bottom has yet to be reached. With today’s news, it seems now that the bear camp will attempt to test last week’s lows in gold around the $1179 area. Should this level not hold, then clearly the market has not found an “equilibrium” yet and lower prices may be seen.
