FX168 Financial Newspaper (Hong Kong) News spot gold fell this week from May 28 to June 1 due to stronger-than-expected U.S. employment data boosted expectations that the Federal Reserve will raise interest rates this month. , boosted the dollar strength. Spot gold fell slightly on Friday, with the lowest price in the market dropping to 1289.12 US dollars per ounce. The gold price still runs below 1300. Gold fell by 8.3 U.S. dollars this week, a drop of 0.64%. The US non-farm payrolls data released in May showed that there were 223,000 new jobs, far exceeding the expected 190,000, and the unemployment rate also recorded 3.8%, setting a new low in 18 years. After the release of non-agricultural data, a large amount of selling pressure caused spot gold to fall below US$1,290 per ounce for a time. Gold prices rebounded after falling, but they are still in a downward trend.
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International spot gold fell 8.3 dollars, or 0.64%, to close at 1293.00 US dollars/ounce in the week of June 1. The highest price was 130.06.60 US dollars/ounce, and the lowest was 1289.40 US dollars/ounce.
Some commodity analysts said that the sentiment in the gold market has clearly turned to pessimism. After the strong US employment data and the further appreciation of the US dollar, the price of gold has readjusted its more certain rate hike outlook on June 13.
The economists were surprised by the May non-farm payrolls report released on Friday in the United States. The data shows that 223,000 new jobs were added last month, and the expected amount is 189,000. The unemployment rate also fell to 3.8%, the lowest level in 18 years.
Keith Investment Macro Analyst Simona Gambarini told Kitco News on Friday that after optimism data was released, all signs showed that interest rates will increase in June. The Chicago Mercantile Exchange’s FedWatch tool currently shows that the possibility of raising 25 basis points again in less than two weeks is as high as 94%.
However, Gambarini pointed out that since the rate hike has been largely digested, most investors now focus on the press conference of Fed Chairman Powell.
The key issue that merits attention will be the Fed’s view on inflation and geopolitical tensions: “Before the FOMC meeting, investors were reluctant to take a bigger stance. They were concerned about Powell’s wording during the meeting and the central bank’s inflation. The Fed's view of geopolitics is also very important. If the Fed delays raising interest rates or geopolitics becomes an obstacle, then this is good for gold."
Gambarini expects that the Fed will raise interest rates three more times this year, bringing the total number of interest rate hikes in 2018 to four. She added that although the rate hike is a major resistance for gold, it depends entirely on the US dollar's response.
"This is really related to the dollar - the dollar has a greater impact on gold prices. If the dollar remains at its current level or falls, then the price of gold should not be dragged down too much by the upcoming rate hike," Gambarini said.
"In the long run, the strong downward momentum of gold may be that after the interest rate reaches 2%, the Fed will still choose not to stop monetary policy tightening," said Colin Cieszynski, chief market strategist at SIA Wealth Management.
"The Fed may continue to raise interest rates in each quarter of 2018 and 2019," Cieszynski said. "After reaching 2%, it may still not stop."
According to statistics, the number of non-farm payrolls in the United States increased by 223,000 in May, and the market is expected to increase by 19,000 people, the previous value increased by 164,000; the US unemployment rate in May was 3.8%, which is expected to be 3.9%, and the previous value was 3.9%. The US Department of Labor also revised the number of non-farm payrolls in March to an increase of 159,000.
(Source: zerohedge, FX168 Financial Network)
(Source: zerohedge, FX168 Financial Network)
It is noteworthy that the latest report stated that the labor participation rate in the United States fell to 62.7% in May and fell for three consecutive months. This is probably a "dark spot" in the non-farm report in May!
The New York Fed’s GDP Nowcast model also raised its GDP growth forecast on Friday. It is expected that the US’s GDP in the second quarter will increase by 3.3%, which was previously expected to be 3.0%. The US Federal Reserve’s GDPNow model predicts that the US’s GDP growth rate in the second quarter will be 4.8%.
In the past week, geopolitical risk brought hope to gold bullish people, but then eased more or less, forcing analysts to take a more pessimistic view of the gold outlook.
“The political uncertainty in Italy and Spain is being resolved,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “Gold is fighting a perfect headwind because of the stunning performance of the US data.”
Even this week's gold price trend has failed to reflect the growing geopolitical tensions, including the wording of the trade war between the United States and its allies. Earlier, President Trump announced that it would impose tariffs on steel and aluminum imported from Canada, Mexico, and the European Union.
Simona Gambarini, Macro Analyst at Kai Investment, said: “Usually, we expect that the escalation of geopolitical tensions will have a positive impact on gold, but prices have not made too much of a response. This is mainly due to the strengthening of the US dollar and gold pressure.”
However, investors should not be frustrated by the short-term weakness of gold, because some analysts expect the price of gold will be more robust in the second half of this year.
U.S. President Trump said on Friday that he will meet with North Korean leader Kim Jong-un in Singapore later this month and that the uncertainty of whether the direct denuclearization negotiations will continue will end.
North Korea’s main official, Kim Young-cheol, had an hour-long conversation with Trump at the White House Oval Office and sent Trump a letter from North Korean leader Kim Jong Eun. According to the Wall Street Journal, Kim Jong-un is expected to show interest in meeting with Trump.
Trump told reporters that he does not believe that the first meeting will lead to an agreement on Pyongyang’s dismantling of its nuclear and missile programs. He believes that the framework will gradually develop over a period of time.
"I think this will be a process," he told reporters after meeting with North Korea's top aide. "I never said a meeting before. I think it will be a procedure."
This week, U.S. Secretary of State Pompeo held a meeting with the North Korean delegation. The Trump administration discussed the possibility of holding a "special fund" that had been cancelled before. On Thursday, Trump said on Twitter that his government "has had a very good meeting with North Korea."
On the other hand, Trump once again released a "great move" on Thursday - tariffs on steel, aluminum and aluminum to Canada, Mexico, and the European Union. Analysts warned that Trump constantly "provoked the incident", which increased the risk of a full-scale trade war. A well-known investment bank believes that if a full-scale trade war breaks out, the U.S. dollar may emerge stronger for a longer period of time.
US Commerce Secretary Ross said on Thursday (May 31) that the United States will impose tariffs of 25% and 10% on steel, aluminum products from the European Union, Canada, and Mexico from June 1.
Rose said that the United States hopes to continue negotiations with Canada, Mexico, and the European Union on trade. It also pointed out that progress has been made in negotiations with the European Union, but it is not enough to continue exempting its tariffs.
The Trump administration’s decision to impose high tariffs on steel and aluminum products has been strongly opposed by the international community. Many economies such as the European Union, Japan, and Australia have expressed concerns and warned that this measure by the United States may not only affect multi-party trade interests, but also pose a threat to the stability of the rules-based multilateral trading system.
In response to Trump's latest move, European Commission Chairman Juncker said on Thursday: "Today is a bad day for global trade. It will retaliate against the U.S. metal tariffs."
From June 8 to 10, the G7 (Group of Seven) summit will be held in Canada. “The Los Angeles Times” wrote a few days ago that as the host, Canada is likely to take the lead in “bidding” Trump.
Canadian Prime Minister Trudeau quickly took retaliatory measures against the US-declared metal tariffs and imposed import tariffs on US goods not exceeding 16.6 billion Canadian dollars (US$ 12.8 billion). This is Canada's strongest trade operation since World War II.
Trudeau said that for decades Canada has fought side by side with the United States and jointly defended its airspace in North America. All this shows that the United States is "unacceptable" and "punitive" when it comes to implementing tariffs on Canada based on national security investigations.
Canadian Foreign Minister Chrystia Freeland said that the tariff rate for Canada will be 25% for steel and 10% for aluminum, and the total amount will be exactly equal to the U.S. tariff.
Canada’s tariffs will take effect on July 1, and will continue until the United States cancels steel and aluminum tariffs. The Canadian tariff will cover products other than steel and aluminum. Canada will also challenge the U.S. tariffs in a committee of the World Trade Organization and Nafta.
After an intense response to Trump’s steel and aluminum tariffs from allies in the United States, such as Canada, Mexico, and the European Union, trade is now taking center stage at the G7 Finance Conference held in Canada!
Driven by political risks, the Deutsche Borse (DB) announced its monthly report on its cash market activity on Friday. The trading platform vendor’s trading volume increased by 10% year-on-year, and the company’s gold holdings also broke through in May this year.
Even more impressive is that DB's gold holdings exceeded the 180-ton mark for the first time. The company’s holding of gold at the beginning of the year was 174.2 tons. As of the end of May, this figure has climbed to 181.8 tons.
The increase in gold holdings was driven by sales of DB's Xetra-Gold ETF. Each unit of Xetra-Gold is supported by a gram of gold, which means that each time someone purchases a unit ETF, one gram of physical gold will be deposited into the DB's position.
Next week's market outlook
Kitco’s weekly gold survey released on Friday showed that Wall Street professionals bearish on the short-term trend of gold prices, while ordinary investors are still slightly bullish. This week, Comex’s gold trading price rose to 1,300 US dollars an ounce in August, but it eventually weakened on Friday, as the US employment report was stronger than expected. The Labor Department said that the number of non-agricultural employment increased by 223,000 in May. In a survey of Wall Street professionals, 14 people participated in the survey. Ten people, or 71%, believe that gold will fall next week. Two people, 14%, believe that gold will rise next week, 2 or 14%. Think that gold will be consolidating. Market participants include gold dealers, investment banks, futures traders and technical analysts. In the survey for ordinary investors, 578 people participated in the survey, 296 people, or 51% think that gold will rise next week, 182 people that 31% believe that gold will fall next week, 100 people or 17% Think that gold will be consolidating.
Bob Haberkorn, a senior commodities broker at RJO Futures, said that "gold will continue to be under pressure next week, employment data will be better than expected, and the possibility of the Fed raising interest rates will also decline."
Sean Lusk, head of Walsh Trading's commercial hedging business, believes that with the strong response from the US employment report, gold prices will steadily decline. "I'm not looking for a huge sell-off, but I'm looking for a callback," said Lasker. "The path with the least resistance seems to be lower."
Charlie Nedoss, senior market strategist at Lassalle Futures Group, expects gold prices to fall. He said "Technically, they (gold futures) failed this week, and despite repeated attempts, the market could not return above the 20-day moving average."
Kevin Grady, president of Phoenix Futures and Options, said: “I still look down on gold. Over the past few days we have seen so-called 'risks.' Yields have been rising, which should prevent the price of gold from rising. In addition, strong non-agricultural employment increases. The unemployment rate of 3.8% will stabilize the pace at which the Fed raises interest rates this year. I believe this will eventually limit the price ceiling.” However, Grady added that there may still be “a lot of geopolitical news”, which may mean price fluctuations. . "The skyrocketing price may occur at any time," said Grady. "We expect an active market in the coming months."
Phil Flynn, senior market analyst at PriceFutures Group, believes that despite the strong employment, gold prices will continue to rise. He said: "We have been very interested in gold." "Obviously, the strong, large-scale employment report puts pressure on gold because it increases the Fed's expectations of raising interest rates. But there are still geopolitical concerns in the world." Flynn added that the ongoing issue of steel and aluminum tariffs is likely to rekindle concerns about trade warfare and support gold.
Richard Baker, the editor of the Eureka Mining Report, was another bulldog surveyed this week. Baker said: "I think that gold prices may return to the $1300 area again, because the political/geopolitical worries bring more boost, instead of the combined drag from the strong US dollar and the reactivated Fed rate hike expectations, the number of jobs may be Increase interest rate expectations."
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