Gold recovered some $11 in today’s trading despite US stocks hitting all-time highs for the second day running. The rebound on gold however, indicates there is some tension among investors ahead of US economic data.
It is a little confusing to understand why investment banks have returned to buying bullion today given the economic data is showing encouraging signs. Construction, car sales and manufacturing are all up and despite a slight drop in factory activity the US economy appears to be faring well.
The main marker however is the non-farm payrolls (NFP) which is due to be released on Friday – and maybe investment banks already know something we don’t. On today’s market activity there may be some cause for concern.
Short coverings on gold
After suffering six days of straight losses, precious metals rebounded on short covers in Wall Street. Gold finished up at $1279.80 on Tuesday, but saw a sharp incline at 1200 GMT when Wall Street opened. Given the macro data is, in the main, promising, it is something of a surprise to find such an influx of gold purchases.
The increase could be a case of panic buying, but it seems as though US traders have lost some confidence in the market ahead of US job data. One way or another the NFP will be a catalyst that will send precious metal prices one way or the other.
It was the ADP National Employment report that put doubts in the mind. Employers in the United States created a respectable 191,000 new jobs in the private sector and although that fell short of the 195,000 forecast by analysts, it is encouraging to note that 72,000 new jobs were with small businesses.
Physical demand up in China
Gold prices will hang in the balance this week until traders have the green light and know which way to go. A slow-down in Chinese manufacturing from the third consecutive month is causing concerns in the Asian market, although there is greater demand for physical gold in the Far East now prices are more appealing.
Market analysts are divided in their opinions over the future of gold too. Some think gold prices will sink lower with the emergence of strong equities, whereas as others say emerging markets will not necessarily drive precious metal prices down. There is still some nervousness around equities.
Technical data indicates the prospects for gold over the short-term look negative and the forecast for April is that gold will trade for between $1250 and $1330 an ounce. Friday will be the defining factor that dictates the direction precious metals will go in April.
Watch out for NFP data on Friday and head over to coininvrsstdirect.com to get the latest deals on gold bullion.