Gold poised to test new highs today, after it significantly bounced back yesterday from its drop following Saturday’s G20 trade announcements.
This morning, Gold spiked after private payrolls company ADP reported only 102,000 jobs were created in June, falling well off the expected 140,000. This makes four out of the five last months that this report has not met expectations.
August futures extended their advance after climbing 1.4% Tuesday to settle above $1,400 an ounce again on Comex. The August contract is currently sitting at $1,423.70, up $15.70.
Gold’s rally may be “unstoppable,” according to a technical analysis by Nenad Kerkez of Elite CurrenSea published by FXStreet.com. Kerkez put the main target at $1,442 but said a “strong bullish impulse” could lead to $1,450 or $1,456. And only a break below $1,390 “could make gold neutral again.”
Gold is once again sought out by safe-haven investors amid fears of trade disputes and tepid economic growth. Hopes for a quick resolution of the U.S.-China trade dispute dimmed on Wednesday, as initial optimism following the meeting between the U.S. and Chinese presidents on Saturday ebbed. And the Trump administration has proposed $4 billion in additional tariffs on the European Union.
Speaking of the EU, gold’s early morning bump was also driven by the news of the European Union leaders’ nomination of IMF chief Christine Lagarde as Mario Draghi’s replacement at the helm of the European Central Bank, reinforcing expectations of monetary policy easing in the bloc.
A major economic indicator – the U.S. monthly jobs report for June – is scheduled for release on Friday. Traders will be looking for the data to either confirm or refute concerns about the health of the U.S. economy and help them forecast what U.S. Federal Reserve policy makers will do at the end of the month.
The payrolls report is expected to show that hiring increased to 164,000 in June from 75,000 in May, according to Bloomberg estimates.
The CME FedWatch Tool has kept the odds of a rate cut this month at 100% since the Federal Open Market Committee’s last meeting in June. And U.S. President Donald Trump on Tuesday picked two Fed nominees likely to support easier monetary policy.
In other markets, the U.S. Dollar Index was slightly higher and bonds advanced. Ten-year Treasury yields dipped to the lowest since November 2016.
Trading may be light for the rest of the week because of the Fourth of July holiday on Thursday, when U.S. financial markets will be closed.
Silver futures rose 0.3% on Tuesday and this morning the August contracts are up $0.088 to $15.295.
Spot platinum, which is sensitive to the growth of the Chinese automotive industry, was higher and palladium lower. Both are up for the week and are both up at $10 an ounce at the time of this report.
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