Spot international gold was at $1, 689.10 an ounce in early Asian trading on Thursday. Gold tumbled sharply in the last session, hitting as low as $1682.90 an ounce, halting a three-session winning streak and ending down $1684.80 an ounce on the negative side. So far in the session, gold has rebounded from its lows, but the overall trend has struggled a bit.
In the last session, gold sub-market opened at $1704.74 an ounce, rose as high as $1707.70 an ounce, touched as low as $1682.10 and closed at $1684.50, down $20.20 or 1.18%.
Meanwhile, COMEX gold futures for June ended down 1.3 percent at $1688.50 an ounce, hurt by a stronger dollar ahead of the U.S. nonfarm payrolls report.
Reflecting investor interest, holdings of the SPDR Gold Trust, the world’s largest Gold exchange-traded fund, hit their highest level since April 2013.
Gold prices fell nearly 1 percent on Wednesday as a stronger dollar and expectations that gold supplies will increase as smelters resume operations weighed on the market, and investors’ appetite for risk gradually improved as countries began to loosen disease-related restrictions.
The spread between us gold futures and London spot gold narrowed to about $2 after the world’s two largest gold smelters said they were resuming almost all operations. The six-week shutdown of smelters hit global gold supplies and helped push the New York/London gold price spread to its widest level in decades. Gold is up about 11 percent so far this year as the global economy slumps during a pandemic.
Bart Melek, head of commodities strategy at td securities in Toronto, said the drop in gold prices could be the result of a combination of two factors, with more supply to COMEX and a slight drop in interest as risk appetite strengthens and the dollar rebounds.
Separately, commerzbank analyst Eugen Weinberg said, “the lack of jewellery demand, combined with the very positive sentiment from equity markets as the economy reopens, is weighing on gold prices.”
ADP payrolls cut by more than 20 million
The U.S. private sector lost more than 20 million jobs in April, according to a report released Wednesday by ADP, as companies shed jobs as a coronavirus blockade shut down much of the economy.
On Wednesday, ADP said April’s loss of 20.236 million jobs was far and away the worst since the survey began in 2002, but not as bad as the 22 million loss forecast in a dow Jones economists’ survey. The previous record was a drop of 834,665 in February 2009, during the financial crisis.
“This level of unemployment is unprecedented,” said Ahu Yildirmaz, vice President of ADP employment data. “the total number of unemployed in April alone was more than twice the total number of unemployed during the great recession.”
The report may still underestimate the actual damage done during the implementation of social alienation measures. ADP used the week of April 12 as a sample period, similar to the way the labor department counts official nonfarm payrolls. In the following weeks of the month, more than 8.3 million americans applied for unemployment benefits, and economists expect another three million to be added last week.
In all, more than 30 million people have applied for unemployment benefits in the past six weeks.
The only bright spot in the report may be that the worst is over as more states loosen restrictions on coronavirus control.
The ADP report was followed on Friday by the bureau of labor statistics’ non-farm payrolls report, which is expected to show a decline of 21.5 million in April, down from 701,000 in March, and a jump in the unemployment rate to 16% from 4.4%.
Jim Wyckoff, senior technical analyst at Kitco.com, said the latest jobs report was “a SOB reminder of the state of the U.S. and global economy during the current novel coronavirus pandemic.”
Fed member James bullard said Friday’s April jobs report could be one of the worst in U.S. history.
Golden aftermarket outlook
“Gold can’t get away from renewed economic momentum,” said Edward Moya, senior market analyst at OANDA. Some U.S. states are relaxing measures taken to prevent a coronavirus pandemic. Despite expectations that COVID 19 deaths could rise to 3,000 a day next month, investors remain optimistic as new cases have not surged. However, the virus takes longer to penetrate rural areas. Against this backdrop, gold prices are likely to continue to consolidate until cases surge elsewhere in the us or a patchy economic rebound disappoints. “Gold should see strong support from the $1,650 level in the short term and should remain on target at $1,800 in the coming months.”
“Technically, the gold trend remains bullish as investors continue to buy gold in case of a second coronavirus and central Banks are forced to print money to ease the crisis,” Carlo Alberto De Casa, chief analyst at ActivTrades, said in a report.
Stephen Innes, chief market strategist at AxiCorp Ltd., noted that the balance of risk is still tilted in favor of gold, with speculative funds poised to pounce when the first signs of a second outbreak emerge.
Joe Foster, portfolio manager at investment firm VanEck, expects gold to reach $2,000 within 12 months as the world continues to respond to massive stimulus measures aimed at protecting the global economy. ‘in some cases, we could see gold prices well above that level,’ he said.
Meanwhile, Joe Foster’s other reason to be bullish on gold is that governments and central Banks around the world are dealing with a deflationary shock; Moreover, gold will continue to do well as financial markets deal with negative real interest rates
According to Heraeus Precious Metals, one of the world’s largest Precious Metals companies, the typical seasonality of gold prices suggests that prices could fall, or at least move sideways, this summer. The silver market is unlikely to see a big price rally anytime soon, and with gold still the precious metal favored by investors, silver’s fortunes may not improve anytime soon.
Todd Horwitz, the chief market strategist at BubbaTrading.com, wrote that the good news for gold is that it has managed to hold on to its main support, but the bad news is that the model is not good and could collapse. We are still as long as we have been for months. Our proprietary algorithms allow us to lock in huge profits, and until the algorithms change, we remain bullish on gold.