Gold prices lifted from overnight lows on a very disappointing ADP private sector payrolls report. Gold had dropped to an overnight low of $1,276 an ounce before being boosted by the bad employment data. Gold is trading near weekly lows this morning, as the US dollar halts a decline that saw it hit 8-month lows yesterday. Gold’s failure to breach resistance at $1,300 for two days running has sparked some profit taking. Sentiment seems to be that this is the correction expected after gold’s huge gains last week.
Gold is seeing support at $1,280, with the next safety net at $1,278. First resistance is at $1,291, then $1,297.
The euro was boosted on the news of the big miss on US private payrolls, but eased slightly as better economic news came in later in the morning. The pair are still trading around 1.15 resistance. The dollar is finally halting its slide against the yen, after hitting an 18-month low yesterday. The greenback got a boost from China, as the government dropped the official yuan fix by the most since the big devaluation in August that shook markets.
Some traders are looking for a bullish reversal in the dollar, after Atlanta Fed president Dennis Lockhart told reporters that a June rate hike was still a possibility. With the June FOMC meeting coming just eight days before the Brexit vote in the United Kingdom, we can’t see a possibility that the Fed will leap into a situation where it might be forced to immediately reverse a rate hike.
The ADP Private Sector Payrolls report released this morning showed that only 156,000 new jobs were added to the U.S. economy for the month of April. This is the lowest number for job growth since April 2013. Private sector job growth for March was revised downward from 200,000 to 194,000.
The economic news looked a little brighter later, as the ISM non-manufacturing index rose 1.2 points to 55.7, showing a continued expansion in the U.S. service sector. The trade deficit for March shrank, but that was because imports fell faster than exports.
Oil futures gave back early gains after the US Energy Information Agency reported a record 2.8 million barrel build of crude stockpiles last week. This was more than double the 1.2 million barrels expected. Traders are clinging to any bit of news that may mean that production is falling or demand is growing. For example, WTI futures are up twice as much as Brent, on news that a wildfire in the Alberta tar sands is forcing evacuation of towns and drilling operations.
Gold, oil, and currency prices will react strongly to the official non-farms payroll report due Friday morning, and will be jumpy tomorrow leading up to that.
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