Spot gold closed with a gain of $1 at $2633 on Friday. The metal was down nearly 0.40% this week, its second straight weekly loss. It traded in the range of $2613 (December 6) to $2657 (December 4).
Data roundup
The US employers added 227K jobs, beating the forecast of 220K, as with October data being upwardly revised to 36K from 12K, the two-month net revision stood at +56K. Average hourly earnings rose 0.4% m-o-m and 4.2% y-o-y, which topped the respective forecasts of 0.3% and 3.9%. Labour force participation at 62.5% was lower than the estimate of 62.7% and the prior data of 62.6%. The government hired 33K workers. The unemployment rate edged higher to 4.2% from 4.1% in October. Overall, on the face of it, the nonfarm payroll report was somewhat encouraging, which allayed the fears of a drastic job market slowdown as the October report was quite weak. However, the household survey showed a weak job picture as it reported a decline of 355K jobs, comparable to -368K jobs in October. University of Michigan sentiment at 74 topped the forecast of 73.2 as one-year inflation expectation at 2.9% was hotter than the estimate of 2.7%. Weak-looking gold managed to find support from falling US yields.
The ISM services Index data released earlier in the week at 52.1 was way weaker than the forecast of 55.70 as ISM prices were firmer than forecast. JOLTs job openings (October) were better than expected though.
ETF holdings
Total known global gold ETF holdings inched higher to 83.022M/oz on December 5 but were lower than the 83.142M/Oz level seen in the week ended on November 29, thus, overall holdings have recorded a net outflow so far this month.
Geopolitics
Geopolitical tensions remain elevated, though somewhat contained. Russia’s President Putin said that Russia could deploy its newly developed nuclear-capable hypersonic Oreshnik missiles in Belarus next year as it has ramped up its production. Meanwhile, mass protests in Georgia over the government’s decision to suspend negotiations on joining the European Union entered a second week as Police crackdown on the protestors turned severe. Syrian rebels aiming to overthrow Assad’s rule wrestled key cities from government control as Aleppo and Hama fell from Assad’s control.
US Dollar and yields
The US yields, taking clues from the unemployment rate, eased following the release of the US nonfarm payroll report on expectations that the Fed will cut rates further at its upcoming FOMC meeting on December 18. The ten-year US yields closed at 4.15% on Friday, down 2 bps on both daily and weekly basis. The 2-year yields at 4.10% were down 0.89% on a daily basis and nearly 1.50% on a weekly basis. The US Dollar Index closed with a gain of around 0.25% at 105.97 on Friday and was up around 0.25% on the week.
Upcoming data and events
Next week, traders will focus mainly on US CPI and PPI (November). China’s CPI, PPI, trade balance and new Yuan loans (all November) will also be on their radar. The ECB and the Swiss central bank are expected to cut their key rates by 25 bps in their monetary policy decision on December 12. GDP data of the UK and Japan are also slated to be released next week.
Outlook
Barring any fresh major geopolitical developments, gold may slip at the beginning of the week on encouraging job reports and healthy risk appetite. However, downside may remain limited to geopolitical risks and the upcoming US FOMC meeting and release of the US CPI and PPI data. At the same time, the upside seems to be limited unless the metal is able to take out the stiff resistance at $2675. Support is at $2613/$2595/$2575. Overall, range-bound trading is expected to continue unless geopolitical tensions flare up in a disconcerting way or the US inflation data turn out to be much hotter than expected. A weak inflation data will stoke concerns about the US economy and gold may gain upward traction in that case.
(The author is Associate Vice President, Fundamental Currencies and Commodities at Mirae Asset Sharekhan)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)