Friday July 5, 2013 10:23 AM
(Kitco News) - A stronger-than-expected U.S. employment report
was the latest headwind to hit gold Friday, and as a result,
analysts are expecting to see lower prices in the near term.
The government reported an increase of 195,000 jobs in June,
when expectations were for 155,000 to 166,000. Further, the tallies
for the previous two months were revised higher. With the revision,
June's job report showed that the U.S. economy created about
100,000 more jobs than economists expected, said Peter Buchanan,
senior economist at CIBC World Markets.
As of 10:14 a.m. EDT, August gold was down $40.70 to $1,211.20
an ounce; one minute before the report was released, the contract
was trading at $1,241.
"There is just no reason to be long gold right now," said
Sterling Smith, futures specialist with Citi Institutional Client
Although the jobs report was positive, Smith said he doesn't
think it will be enough to force the Federal Reserve to cut back on
its $85 billion monthly bond-purchase program right away. He said
he could see the Fed waiting to see at least two more jobs report
and then perhaps act in November.
Buchanan said he expects the Fed will begin to taper in October.
While the employment numbers were better than expected, he said
some of the other data points haven't been as strong as
For now though, both analysts expect that the markets will
continue to price in an exit strategy sooner than later, which will
be negative for gold. Smith said in the short term, gold could test
support at $1,000 an ounce.
"Can we go lower than that? We certainly can," he said. "If you
are looking for good news in gold, you are holding onto fairy tales
and hope. Right now, the market is caught in a bear trend."
Michael Widmer, metals strategist for Bank of America Merrill
Lynch, agreed that prices could hit $1,000 if the U.S. economy
continues to pick up and interest rates continue to move
"There isn't a lot in favor for gold right now," he said.
"Growth is picking up and we don't have any signs of
Adding to the gold's weakness is the strong U.S. dollar, which
not only jumped Friday after the jobs report but rallied
significantly on Thursday after the Bank of England and the
European Central Bank released dovish monetary policy
Read the latest news in gold and precious metals markets
By Neils Christensen of Kitco News firstname.lastname@example.org