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Gold dips in early Asia after overnight surge, U.S. jobs data eyed

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Investing.com -

Investing.com - Gold prices dipped slightly in early Asia on Thursday as investors looked ahead to the end of the week U.S. jobs report for fresh direction after an overnight surge.

On the Comex division of the New York Mercantile Exchange, gold for April delivery eased 0.06% to $1,142.40 a troy ounce.

Silver for March delivery gained 0.03% to $14.675 a troy ounce, while copper for March delivery fell 0.06% to $2.100 a pound.

The Labor Department's Bureau of Labor Statistics is expected to report on Friday that nonfarm payrolls increased by 188,000 in January, falling sharply from December's robust gain of 292,000. It would mark the first month that the figure dipped under 200,000 since September. The unemployment rate, meanwhile, is expected to remain unchanged at 5.0%. Many economists are more concerned with the pace of wage growth amid soft hourly earnings over the last year. A major uptick in earnings could bolster wage push inflation and help the Federal Reserve move closer to fulfilling both legs of its dual mandate.

Overnight, gold surged to a fresh three month high on Wednesday as the dollar continued to retreat from last week's Bank of Japan-driven rally, amid signals of slowing economic growth and decelerated job gains in the labor market.

Gold has closed higher by at least $10 an ounce in three of its last seven sessions. At one point on Wednesday, the precious metal reached its highest level since October 30.

Gold likely gained support at $1,046.20, the low from December 3 and was met with resistance at $1,175.10, the high from Oct. 28.

On Wednesday morning, the ADP Research Institute said in its January employment report that private payrolls last month rose by 205,000. While the figure came in above consensus estimates of 190,000, it fell considerably below December gains of 257,000. The ADP employment report is widely viewed as a precursor for the Department of Labor's monthly assessment of the U.S. employment situation, which is released on the first Friday of every morning.

Although Core PCE Inflation ticked up by 0.1 to 1.4% in January, it still remains considerably below the Fed's targeted objective of 2.0%. The Core PCE Index, which strips out volatile food and energy prices, is the Fed's preferred gauge for inflation. Separately, the Institute of Supply Management said Wednesday morning that its Non-Manufacturing Index last month fell sharply by more than 2 points to 53.5, far below consensus forecasts for a 55.5 reading. Major declines in output and employment growth pushed the index to its lowest level in 23 month. The survey accounts for roughly 90% of the U.S. economy.

Further signs of subdued growth in the economy and sluggish inflationary pressures could convince the Fed to delay its next interest rate hike beyond the first quarter. After tumbling approximately 5% in January, the major U.S. indices are coming off their worst month to start a year since the Financial Crisis. Yields on the U.S. 10-Year, meanwhile, slumped to 10-month lows on Tuesday, as government bond prices continue to skyrocket.

"The tightening of financial conditions that has taken place since the Fed began raising short-term rates in mid-December is a matter of considerable concern to the Fed," Federal Reserve Bank of New York president William Dudley told Market News on Tuesday.

Any rate hikes by the Fed this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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