05 February 2021

Gold Tumbles to Lowest Level Since November

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News shaping
the markets today

     

What’s happening: Gold futures fell sharply on Thursday, settling at the lowest level since late November.

What happened: Gold and silver prices recorded significant losses on Thursday, following strong economic data from the US.

Strength in the US dollar, along with an increase in Treasury yields, pushed prices of both precious metals lower by more than 2% during the session.

Why it matters: The US released upbeat economic reports on Thursday, after which investors gave up safe-haven assets, including gold and silver.

US weekly jobless claims declined for a third consecutive week to a nine-week low, signalling a pickup in hiring numbers, with a decline in covid-19 infections in the country. The Labor Department reported a decline in initial jobless claims to 779,000 for the week ended January 30, from 812,000 in the prior week.

US factory orders also grew 1.1% in December, rising for the eighth successive month, the Commerce Department reported.

Strength in the greenback, a rival safe-haven option, also impacted the demand for gold. The US dollar index, which measures the currency’s performance versus a basket of major rivals, rose to a two-month high. An increase in the US dollar also made gold more expensive for foreign buyers.

Moreover, the 10-year Treasury note yield added more than 1%, reaching its highest level since mid-January. A strength in bond yields also dissuades buyers from putting their money in the yellow metal.

April gold dipped $43.90, or 2.4%, to close at $1,791.20 an ounce on Thursday, settling at the weakest level since late November. Meanwhile, March silver lost 2.4% to settle at $26.234 an ounce. The white metal had added 1.8% on Wednesday, following a more than 10% plunge on Tuesday.

Other metals also recorded losses on Thursday, with March copper falling to $3.5530 a pound and April platinum settling lower at $1,103 an ounce.

What to watch: Markets will keep an eye on the developments around the stimulus package proposed by US President Joe Biden. The approval of a massive package could impede the dollar’s strong run, providing support to gold prices.

Rising covid-19 cases remain a major concern for the markets, with total infections surging past 104.8 million globally.

The Markets Today

     

US stocks will be in focus today ahead of the all-important non-farm payrolls (NFP) report scheduled for release later in the day.

Context: Wall Street closed sharply higher on Thursday, ahead of the US Department of Labor’s January jobs report, scheduled for release at 1:30pm GMT today.

Details: The US economy witnessed a decline in net payrolls during December, marking the first downturn since April, as fresh lockdown restrictions came into effect. Employment in the leisure and hospitality industries tumbled by around 500,000 during the month, amid massive layoffs at various restaurants and bars.

However, the country’s economy is projected to have resumed adding jobs in January, with the easing of covid-19 restrictions and the government’s stimulus measures providing some support to the labour market.

“We expect to see payroll growth gathering momentum, starting as soon as February, in the wake of the reopening of outdoor dining in California, indoor dining in Michigan and Colorado, and the scattered easing of restrictions elsewhere,” said Ian Shepherdson, chief economist for Pantheon Macroeconomics.

Earlier this week, the US reported various economic data that exceeded market expectations, sparking hopes of a stronger rebound in the labour market. ADP reported an addition of 174,000 in private payrolls in January, while new weekly jobless claims also declined to a nine-week low.

Meanwhile, US stocks closed higher on Thursday, with investors expecting a strong jobs report to boost recovery hopes. The US economy is projected to add 50,000 jobs in January, following the loss of 140,000 jobs in the previous month. The unemployment rate is expected to remain unchanged at 6.7%.

The Dow Jones index jumped 332 points to close at 31,055.86, while the S&P 500 index added 1.09% to reach a record high of 3,871.74. The tech-laden Nasdaq 100 surged 1.18% to close at 13,560.89 on Thursday.

What to watch: Although the NFP moves markets globally, investors will keep an eye on the major US indices and the greenback as a cue to determine direction and volatility in other asset classes.

Other Markets: European trading indices closed mostly higher on Thursday, with the German DAX 30 and French 40 up by 0.91% and 0.82%, respectively. However, the FTSE 100 moved lower by 0.06%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s factory orders, France’s balance of trade, current account and payroll employment in private sector, UK’s house price index, Italy’s retail sales, Spain's consumer confidence indicator, Mexico’s gross fixed investment, Canada’s balance of trade, employment change, unemployment rate, imports, exports and Ivey PMI, Turkey’s treasury cash balance, Russia’s annual inflation rate and gross domestic product as well as the US balance of trade, imports, exports, Baker Hughes crude oil rigs and consumer credit.

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