Gold was modestly easier in overseas trading on Thursday, but jumped back toward the recent highs in New York amid further mixed U.S. economic data. The yellow metal traded back above 1350.00, bringing the high from earlier in the week at 1354.69 back within striking distance.
U.S. initial jobless claims for last week came in better than expected at 323k, but factory orders missed expectations, falling 0.7% in January. The latter adds further to the downside risks for tomorrow’s release of February jobs data. It also further reinforces the tepid GDP trajectory, as does the significant downward revision in Q4 productivity to 1.8%, from 3.2% previously.
Yesterday’s misses on the ADP survey and ISM-NMI caused a number of analysts to downwardly revised their expectations for February nonfarm payrolls. Those revised forecasts are in the 120k – 135k range.
The BoE and ECB both held steady on rates today. Despite persistent concerns about deflation in the eurozone and pressure from a number of different directions to ease further, the ECB opted not to deploy any additional measures.
The euro rose sharply to near the 29-month highs at 1.3893 in reaction. Perhaps ECB chief Mario Draghi is just keeping his powder dry until the time is right, premised on his assertion that economic and monetary conditions hadn’t changed enough to warrant further action. However, the market may be starting to think that Draghi’s threats to use “all available instruments” is nothing more than jawboning.
Nonetheless, Draghi seemed confident that inflation would pick-up as the recovery accelerates. While that may have helped gold somewhat, I think the sustainability of the recovery in Europe remains quite dubious and therefore negative price risks will remain at the fore.
NY Fed President William Dudley said today that he remains optimistic about the economy and sees short-term rates moving higher in mid-2015. Well, he can’t be all that optimistic if he doesn’t believe a rate hike will be warranted for more than a year.
The Fed will be watching the employment data very closely tomorrow. Another bad number could by the catalyst for a pause to the taper. Recent soft data may already have some investors front-running such expectations.