Gold prices have regained last night’s 13-month high, after shrugging off a better than expected non-farm payrolls report for February. One hour after the release of the payrolls report, gold had rallied sharply to regain the $1,270 mark. April gold futures are up $17 an ounce, while spot gold is up $11, set to push the overnight high of $1,275.90 even higher.
This unexpectedly strong showing by gold in the face of a non-farm payrolls report that beat expectations is changing earlier tight resistance levels to support. Look for minor support at yesterday’s spot close of $1,263.90, with $1,253 the next stop. Resistance comes in $1,271, then $1,276. Gold keeps surprising to the upside, increasing the odds of a quick consolidation before heading higher.
The dollar jumped immediately after the non-farm payrolls report beat expectations, which caused gold to track that movement in the opposite direction. But traders quickly found bad news buried beneath the headline, reversing both trends. Both wages and hours worked fell in February, compared to January. This may be indicating that, while the number of people hired went up, these people were taking low-paying, part-time work. This doesn’t bode well for the direction the economy is taking.
Another bit of sobering news was released this morning, in the shape of the US trade balance report. It showed that the strong dollar is still hurting US exports, which fell to a 5.5-month low. The trade deficit widened by 2.2% as a result,
April gold futures were up for the second day Thursday, handily breaking the psychological barrier at $1,250. Gold futures rose a whopping $16.40 (1.3%) to close at $1,258.20 an ounce. This gave “paper” gold a 19% gain year-to-date. Spot gold beat even that, jumping a huge $24.40 (1.97%) to close at $1,263.90.
Nymex oil couldn’t hold on to that important $35 a barrel level yesterday, dropping from a high of $35.32 to settle at $34.57. Brent crude posted a slight gain, up 14 cents to $37.07 a barrel.
Stocks on Wall St. closed in the black yesterday, once again rescued by higher energy stocks. The energy sector of the S&P 500 gained enough to erase its decline for 2016, while bank stocks rose in late trading. In what seems a shrinking number of gaining stocks, it has been energy and banking that has moved the markets both up and down.
Gold may get a fresh leg up next week, as the ECB meets next Thursday to decide if languishing economic data for Europe warrants a cut in benchmark interest rates even deeper into negative territory. The whole experiment in negative interest rates have the markets on edge, because there is theoretically no limit to how far rates could drop. Back in the normal world, zero percent interest rates were the absolute bottom, and banks and investors could make plans accordingly.
Negative interest rates also take away Warren Buffet’s main argument against holding gold: that it doesn’t pay dividends. Well, it doesn’t charge you interest, either, an important point when bond yields are negative and more banks are passing the costs of negative interest rates on to consumers.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product