Gold futures rose in the US on Monday after another washout in oil prices that could prompt the deflation-sensitive Federal Reserve to move slowly with rate rises.
Gold for February delivery on the Comex division of the New York Mercantile Exchange was last up $7.80 at $1,223.90 per ounce. Trade has ranged from $1,217.50 to $1,231.30, which is a one-month high.
“I’m always reluctant to get overly friendly to the market when it is near its highs, but its resilience is impressive so far this year and one has to respect that,” Marex Spectron’s David Govett said.
“There is still good physical demand out of Asia at lower numbers, keeping it supported and it would seem that there is money looking for a home at the beginning of a new year which is happy to invest in precious metals,” he added.
Labour reports over the next several months will take on added significance because the Federal Reserve is on the verge of lifting interest rates. The current market consensus is that rates will rise in mid-2015 although this is a moving target that will be dictated by jobs and inflation data.
Total US non-farm payroll employment rose by 252,000 in December, which beat the 241,000 forecast, while the unemployment rate declined to 5.6 percent, the US Bureau of Labor Statistics reported today.
But the report sounded several worrying notes. The labour force participation rate edged down by 0.2 percentage points to 62.7 percent in December, while average hourly earnings fell five cents to $24.57 following an increase of six cents in November.
“The widely anticipated US non-farm payroll number, although coming in better than expected, failed to provide much of an upside lift to equities, as the fact that wage gains dipped prompted investors to focus on the ‘glass half empty’ part of the report,” INTL FCStone’s Ed Meir said.
Meanwhile, the rout in oil continues, with light sweet crude (WTI) futures last down $1.56 at $46.80 per barrel, which near a five-and-a-half-year low.
“The impact of weaker oil remains somewhat of a wild card, but we suspect that on balance, lower oil will work in gold’s favour in that declines in energy will likely lead to additional selling in US equity stocks.” Meir said.
“Moreover, with the US now practically the world’s largest oil producer, further price declines in oil will also have negative repercussions on the domestic manufacturing industry and perhaps help postpone the Fed’s timeline for raising rates if the economy starts to flag,” he added.
In gold-specific data, Comex net length in precious metals bar palladium increased as of last week. Gold net longs were up by 1.01 million ounces to 13.81 million ounces, the highest level since August.
“In spite of this, speculative length is still quite subdued at only 42 percent of the record, which suggests there is ample room to extend positioning further. For a second straight week, gold positioning has gained on a combination of fresh longs and short-covering,” UBS analyst Edel Tully said.
Comex silver speculative length rose 4.38 million ounces to 184.76 million ounces but remains at just 38 percent of the all-time high.
“The latest move was due to an increase in gross long positions, which brought the level closer to the 12-month average,” Tully said, “It’s still too early to judge whether investors are starting to become friendlier towards silver again, but the metal is off to a good start so far this year with around six-percent price appreciation year-to-date and the gold:silver ratio off the 76 highs.”
Comex silver for March delivery was up 3.6 cents at $16.455 per ounce. Trade has ranged from $16.430 to $16.690.
As for the other precious metals, platinum for April delivery on the Nymex was down $2.30 at $1,227.80 per ounce, while the most-actively traded palladium contract was at $803.50, up $3.35.
Today’s macroeconomic data schedule is fairly light – no metal market-moving numbers are scheduled – but China is tentatively scheduled to release its trade balance, new loans and M2 money supply data on Tuesday, which will be closely eyed for signals of the country’s strength.
In wider markets, the dollar was 0.25 percent stronger at 1.1812 against the euro, while Germany’s DAX and France’s CAC-40 were up 1.07 percent and 1.14 percent respectively. In Asia, the Nikkei and Hang Seng closed 0.18 percent and 0.45 percent higher.
(Editing by Mark Shaw)
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