Gold Price Jumps After 'Pregnant Reversal Warning' as Strong US Jobs Data Signal Fed Rate Hike

GOLD PRICES jumped in London trade Friday lunchtime, hitting near 1-week highs above $1072 per ounce after new data showed the US trade deficit widening last month to its worst November since 2008.
Separate US jobs data confirmed Wednesday’s private-sector ADP Payrolls report, showing a strong rise in net hiring for November just ahead of analyst forecasts.
Rising 2.5% from this week’s new 6-year low at $1046.50, the price of wholesale gold investment bars also reversed two-thirds of last week’s $20 drop as well.
Gold also rose priced in Euros, but held a 1.7% drop for the week – heading for its lowest Friday finish since mid-September at €982 per ounce after yesterday’s shock surge in the single currency on the FX market in the face of extra QE bond-buying and negative interest rates announced by the European Central Bank.
“In principle, the expansionary monetary policy followed by many central banks should lend support to the gold price,” says a commodities note from Commerzbank in Germany.
“[But] market participants will now be waiting with bated breath to see what the US Federal Reserve will do in ten days’ time.”
The US is now “close” to full employment – one half of the central bank’s mandate – said Fed chair Janet Yellen to Congress in her regular testimony Thursday.
On the other half, “Longer-term inflation expectations remain reasonably well anchored,” Yellen said, “bolster[ing] my confidence in a return of inflation to 2%.”
Thursday’s ECB announcment, in contrast, “wrong-footed” traders, says US brokerage INTL FCStone, sparking “frenzied trade” – although “the precious metals complex had it relatively easier than some of the hotter markets like currencies and oil.”
The rise in Dollar gold prices “show[ed] as a Harami,” said Canadian-owned bullion bank Scotia Mocatta’s technical analysis overnight, “which in Japanese Candlesticks translates to ‘pregnant’…basically an inside day at the end of a very bearish down move.”
After Wednesday’s close to US gold futures trading “achieved a fresh cycle low at $1051,” says Scotia, “the technical picture is a Reversal warning. A higher close [Friday] will bring in fresh buying of gold.”
Across other investment markets Friday, the price of short-term US Treasury debt fell further but 10-year bonds rallied, edging yields down from Thursday’s sudden 3-week high above 2.30%.
Crude oil meantime fell hard, with US contracts dropping near 12-year lows beneath $40 per barrel,  on news that the Opec oil cartel, meeting in Vienna, was unlikely to propose or agree a cut to output quotas.
New York equity markets rose sharply after the new US jobs data, but European stock markets held their earlier 0.8% losses for the day, pulling France’s Cac40 index down to its lowest level since mid-October.


This publication is for education purposes only and should not be considered either general of personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. This report was produced in conjunction with ABC Bullion NSW.

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