New economic data looks to suppress gold price

The gold price took another hit this week as optimistic US jobs data pushed the possibility of a Federal Reserve hike upwards.

Spot gold fell 0.2% to $1,210.94 at 04:33 GMT. The metal dropped more than 2% last week, touching its lowest point since March 15 at $1,207.15. Meanwhile U.S. gold futures for August were at $1,210.10 per ounce.

Data on Friday showed U.S. non-farm payrolls jumped by 222,000 jobs last month, beating expectations of a 179,000 gain, according to Reuters.

An accelerating economy will make a stronger case for higher interest rates, making borrowing more expensive and potentially cooling off equity activity. Higher interest rates tend to be dollar and treasury bill-supportive: both have increased, which makes them more attractive relative to gold.

Federal Reserve chair Janet Yellen will testify on Thursday to Congress’s Joint Economic Committee. Speculators will examine the recent jump in job data looking for hints as to how monetary policy will react.

The prospects do not look good for the gold price, however. Atlas Pulse’s Charlie Morris notes that the bond market is falling despite quantitative easing being reversed; he likens gold to a very specific type of bond:

“In some ways [gold] resembles a 20 year inflation-linked bond known as a TIPS. The Atlas Pulse doctrine is that gold is a zero-coupon, inflation-linked bond, with zero credit risk, that is irredeemable. And that’s the problem. If gold is a TIPS, TIPS are falling. The increase in inflation expectations thus far has failed to keep up with yields.”

If monetary tightening goes on as planned, it will have continual downward pressure on gold; combined with a poor bond market, economic factors don’t seem to be doing the precious metal any favours.

PhotoHamza Butt, licensed under CC BY 2.0.

Link to this article: : http://www.goldmadesimplenews.com/gold/new-economic-data-looks-to-suppress-gold-price-13266/

Posted by on Jul 10 2017. Filed under Gold News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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