Gold dipped as Friday got underway and was on course for a net weekly decline as data released about U.S. jobs turned out to be a lot stronger than had initially been expected. This data reduced expectations that the Fed would make further cuts to its benchmark lending rate when it meets next month.
In early trading in markets in Asia and Europe, the price of spot gold reduced by 0.6% from the previous closing price and was now selling for $4,052 an ounce. Cumulatively, the precious metal has declined in price by 0.7% so far in the week. Gold futures slated for delivery in December saw their price drop by 0.2% to a $4,050 price.
Commenting about the current gold performance, Brian Lan, who serves as the managing director of GoldSilver Central, said that the price of gold was consolidating. He added that the strengthening of the American dollar was also affecting bullion, as well as the speculation regarding the chances of a Fed rate cut come December. All these factors were bearing on the price of the precious metal, he added.
Lan said traders weren’t sure about a rate cut decision and this was coming at a time when people start taking their profits as the year approaches its end. He explained that last week was also marked by profit-taking and the trend continued this week.
The U.S. dollar was set to record its best performance in more than 4 weeks. Every time the USD strengthens, there is an adverse effect on gold’s price because traders who hold other currencies find the precious metal more expensive if they are buying it from sources that price it in dollars.
Furthermore, the report released by the Labor Department showed that nonfarm payrolls in the U.S. recorded a 119,000 uptick during September. The data was released late due to the government shutdown, and the release surprised markets because previous estimates had put the expected increase at about 50,000. The actual numbers were therefore a lot higher than had previously been forecast.
As a result of this better than expected data, many members of the FOMC are expressing reluctance to make additional cuts so soon, especially given other data that shows inflation is again edging upwards and thwarting efforts to bring it down to the target level of 2%. Given these mixed signals, traders now put the likelihood of a cut in December at 39%.
That aside, the bigger picture shows gold has had a remarkable performance this year and many fundamentals indicate that it is likely to retain its upward trajectory. Gold industry actors like Torr Metals Inc. (TSX.V: TMET) will therefore be unfazed by the current consolidation taking place as many traders cash in their gains.
NOTE TO INVESTORS: The latest news and updates relating to Torr Metals Inc. (TSX.V: TMET) are available in the company’s newsroom at https://ibn.fm/TMET
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