Yesterday gold climbed around 1% as fears over today’s non-farm payroll data took hold. COMEX gold futures hit a three-week high as the dollar index fell 1.49%
The gold price is set to finish the week on a three-week high, but who knows what could take hold following the jobs data. No one expects any major moves prior to the report release. The current gold price, at the time of writing is $1,410/oz
Whilst last week’s unemployment benefit claimant count fell it did not suggest enough job growth to see the Fed pull back QE. Non-farm payroll is expected to have increased by 170,000 in May. The overall unemployment rate is expected be steady at 7.5%.
To add further worries to India’s gold buying population, a senior finance minister said yesterday that the government would not hesitate to implement further controls on the gold market. The import duty now stands at 8% having increased from 6% earlier this week.
To offer an alternative to gold, the government offered inflation-linked bonds, for the first time in 15 years, this week.
HSBC yesterday released a note stating that they didn’t think the hike in duty would have a dramatic impact on gold demand, ‘While the duty hike may make bullion more expensive in India, it is important to note that gold prices in local currency terms are currently trading at lower levels than at any point in time last year.’
Yesterday’s central bank meetings at the Bank of England and the European Central Bank saw no change in interest rates. This was as expected but disappointed US investors who had expected further easing. The Euro rallied, to a three-month high, shortly after Draghi’s upbeat economic comments.
The strength of the euro certainly provided some support to gold. In the past the two have had a positive correlation.
In case you haven’t spotted it yet, be sure to read our latest research piece: “COMEX revealed: Investigating the paper gold market”.
Will Bancroft and I have been looking at the elements that make up the gold market’s structure, from futures and ETFs to the largest suppliers of physical gold bullion. Our latest research shows that COMEX, the largest paper market, remains the key to setting the price of gold.
Key points include:
- Trading at COMEX relatively low compared to last 5 years
- Percentage of gold backing COMEX in 2013 ranges from 4.8 to 7.1%
- 1.3 to 3% of traders taking delivery in 2013, even with JPMorgan’s massive gold hand-over
- Gold bullion stocks exceeding delivery amounts means COMEX not under pressure
- Number of traders opting for delivery needs to rise 250% to affect stability of COMEX