Gold Price Down on Dollar Rally

May 9th, 2016 by

gold1Spot gold prices are down 1.75% in early New York trading, as the dollar stays strong despite a poor non-farm payrolls report Friday. Oil prices are off their highs this morning, on news that a shift in the high winds are helping firefighters keep the Ft. McMurray wildfire away from Alberta tar sands mines.

Speculators jumping out of gold this morning have scrambled some forecasts Friday that gold was about to make another run at $1,300. What has probably caught gold traders wrong-footed is the fact that the dollar did not react as expected after Friday’s non-farm payroll report took June off the table for a Fed rate hike.

At 10am, spot gold is trading down $22.30, to $1,265.40. June gold futures are down $28.90.

The gold price is bouncing from the  morning low of $1,260, which should be first support. If that breaks, the next substantial support is $1,260. First resistance is $1,272, then $1,276.

payroll-target

The big news Friday was of course the non-farm payrolls report, which came in far below expectations. Conversely, these bad report also took away expectations that the Fed would raise interest rates next month, which was positive for stocks.

Wall St. spent most of the day in the red, but managed to recover slightly into the close. Despite a positive close, the S&P 500 fell 0.4% on the week, for a second week of losses in a row.

Oil prices benefited from early weakness in the dollar, and worries that the Alberta wildfires would spread into the tar sands operations nearby. However, Friday’s 0.8% gains for both WTI and Brent were not nearly enough to erase weekly losses. WTI futures were down 2.7% on the week, while Brent was savaged. It closed down 4.2% for the week. giving up a four-week weekly winning streak

Gold futures closed for the weekend just as prices were hitting daily highs. June gold gained $21.70 (1.7%) to close at $12.94 an ounce. This helped paper gold log a slight weekly gain of 0.3%.

Spot gold closed Friday in the middle of the day’s trading range, at $1,287.70, up $10.10 (0.79%.)

In international news, the Greek parliament passed new austerity measures that will reduce government pension plans and raise taxes. Socialist Prime Minister Alex Tsipras has seen his majority in the Greek parliament shrink to just three seats. It was those three seats that enabled these most recent austerity measures to pass — 153-147.

A big, shake-up in Saudi Arabia occurred Saturday, when long-time Saudi oil minister Ali al-Naimi was relieved of his post. His successor is chairman of the state-owned oil company Aramco, Kalid al-Falih.

Saudi oil minister

Saudi oil minister Ali al-Naimi

The 81-year old al-Naimi, perhaps the most respected oil minister in the world, ran afoul of Deputy Crown Prince Mohammed bin Salman for agreeing to exclude Iran from needing to sign the Doha accord to cut production. This led to an embarrassing situation when bin Salman decreed the night before the meeting that Saudi Arabia would not sign the agreement if Iran did not.

al-Falih, who takes over the post of oil minister, is also considered a very wise and intelligent man. He has had dealings with many men in the upper echelons of the global oil community, but perhaps the most important factor in his ascent is that he is loyal to Prince bin Salmon.The 30-year old bin Salman, who is second in line to the throne, has been putting capable, but loyal, men in high positions as he consolidates his power.

 

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