Economic Optimism Pressures Gold

Economic Optimism Pressures Gold

Growing economic optimism in the U.S. pressures gold early Wednesday after a bullish U.S. manufacturing report steadied the dollar and boosted equities. This morning’s disappointing U.S. employment report for August did give the yellow metal a lift off the overnight lows.

ADP’s private payroll report for August showed growth well below expectations. Companies added 428,000 jobs last month, economists surveyed by Dow Jones had predicted a 1.17 million jump. This is, however, much improved from July’s lagging 212,000 jobs.

Gold backtracked on Wednesday from a near two-week high in the prior session as the dollar rebounded and strong U.S. manufacturing data raised hopes of a swifter global economic recovery.

Futures briefly climbed above $2,000 an ounce Tuesda but couldn’t sustain the rally after the Institute for Supply Management reported U.S. manufacturing expanded at the fastest rate since 2018 in August. The data helped the dollar steady. A stronger dollar is typically bearish for gold.

Gold futures rose 30 cents Tuesday to settle at $1,978.90 an ounce on Comex. The December contract increased $4 in the first two days of the week. Futures slipped 0.4% in August — even after closing at a high of $2,069.40 on Aug. 6. Currently, the December contract is $1,965.79, while the DG spot price is $1,958.80.

The yellow metal is still up more than $450 — or 30% — so far this year as investors have flocked to gold as a hedge against uncertainty as the coronavirus pandemic has worsened and threatened the economy.

U.S. manufacturing grew for a fourth straight month after sinking in the initial months of the coronavirus pandemic. The ISM manufacturing index rose to 56% in August from 54.2% in July, beating expectations of 54.9% by economists surveyed by MarketWatch. Figures over 50% indicate expansion.

The key U.S. monthly job numbers for August will come out Friday, with the weekly numbers for last week out on Thursday. U.S. applications for unemployment benefits topped 1 million for the 22nd time in 23 weeks, amid the economic impact of the coronavirus pandemic and associated lockdowns, according to the weekly U.S. initial jobless claims report released last week by the Labor Department.

The virus known as COVID-19 has killed more than 855,000 people worldwide and sickened 25.7 million. About 24% of the cases — and 22% of the deaths — are in the U.S. The country has 6.07 million cases, more than any other nation.

Silver futures rose 5.1 cents Tuesday to settle at $28.65 an ounce on Comex. The December contract advanced 3.1% in the first two days of the week. The most active contract gained 18% in August after soaring 30% in July. At the time of this post, the December contract was $27.93, while the DG spot price is $27.68.

Spot palladium increased 0.9% Tuesday to $2,304.20 an ounce and is up 3.1% in the first two days of the week. It rallied 7.6% last month. Spot platinum advanced 1.3% Tuesday to $951.00 an ounce and rose 1.2% in the first two days of the week. It increased 3.5% in August. Currently, DG spot price for platinum is $917.80 and $2.267.40 for palladium.


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