Gold Market To Keep An Eye On Dollar After Strong Jobs Data By Debbie Carlson

The U.S. dollar climbed to its highest level since 2009 after a much higher-than-expected nonfarm payrolls report, and gold-market watchers said how much further the dollar climbs could influence the metal next week.

February gold futures fell Friday, settling at $1,190.40 an ounce on the Comex division of the New York Mercantile Exchange, up 1.27% on the week. March silver fell Friday, settling at $16.258 an ounce, up 4.5% on the week. 

In the Kitco News Gold Survey, out of 36 participants, 21 responded this week. Seven see prices up, while 10 see prices down and four see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Several market participants said they were impressed that gold did not sharply extend its losses after the jobs report. Gold prices dropped under $1,200 following a blowout November nonfarm payrolls report. The U.S. Labor Department said employers created 321,000 jobs, the biggest gain since January 2012, and far above economists’ expectations for about 230,000 new jobs. The previous two jobs reports saw upward revisions in employment gains, and wages also rose. The job gains in 2014 are the fastest rate since 1999.

“Gold instantly printed $10 lower as expectations are now that the Fed will start talking about the Fed funds going higher than expected - not generally a positive things for commodities,” said Steve Scacalossi, director, head of sales, global metals, TD Securities.

The U.S. dollar rose on the news, building on the gains seen Thursday when the dollar index rose above 89 for the first time since March 2009. Scacalossi said that level was the height of the post-global financial crisis rally.

Kevin Grady, owner, Phoenix Futures and Options, said gold is holding on better than he would have expected given the rise in the dollar and the fall in crude oil prices. Values were still weak; however, he said, gold prices should be down $25 an ounce given the news. What’s keeping the yellow metal from breaking further is strong buying interest under the market.

“There is a big buyer under the market. The fact that we had a huge jobs number, the dollar is up 600 points, the energy market is getting killed and gold is only off $12,” he said, adding that the strong buying at lower levels is keeping gold from falling further.

Some market watchers said while it’s admirable that gold did not sell off sharply when the jobs data came out, gold also struggles to extend its gains when it tests the upside of the current range.

Sean Lusk, director of the commercial hedging division at Walsh Trading, said he expects gold might test the bottom of the current range next week.

“Near term, gold is getting a little toppy here. There’s the (U.S.) dollar strength, weakness in crude. Prices should revert back to the downside, although we’ve seen a little uptick in physical (demand)…. We never really saw a follow-through push higher over $1,200. Part of that was waiting for today (and the jobs numbers),” he said.

The nonfarm payrolls data show the U.S. economy is improving slowly, he said. “We’re reaching an important threshold that the Fed (Federal Reserve) has put out there for the first Fed rate hike to happen,” Lusk said.

With this nonfarm payrolls report out of the way, Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said for next week the job openings and labor turnover survey, known as the JOLTS report, will shed more light on the U.S. labor market.

This is a broader measure of the labor market and the Fed under Chair Janet Yellen puts a greater emphasis on this report, he said.

Analysts at Nomura said job openings rose by 821,000 so far this year and are above prerecession levels. “Although hiring continues to lag behind, we are starting to see some signs of a pickup, with hirings jumping to a near seven-year high in September…. Based on the reported increase in the share of firms with job openings not able to be filled in the October NFIB (National Federation of Independent Business) jobs report, there is a higher chance that the JOLTS measure of job openings will increase in October after declining in September.”

Other economic reports out next week are Thursday’s retail sales and Friday’s producer price index report. Nomura said higher vehicle sales in November should boost the headline retail sales figure, and lower gas prices could give consumers should more disposable income. The November PPI reading is expected to fall 0.1% because of lower farm and energy prices, they said.

By Debbie Carlson