Gold, Silver See Modest Strength At The Start Of The Week

Gold prices are starting the week relatively strong considering Friday’s surprisingly positive nonfarm payrolls report, but some analysts are expecting to see more pressure in the near-term.

Electronic trading of Comex February gold futures  open the Sunday North American evening/Monday Asian session at $1,191.20 an ounce, up from Friday’s pit close of $1,190.40 an ounce. Shortly after the open, prices started to fall, hitting an early session low of $1,187.30 an ounce. Prices have since bounced higher; as of 9:12 p.m. EST, February gold was trading at 1,193.80 an ounce.

Silver prices are also relatively strong, benefiting from gold’s performance. Electronic trading of Comex March silver futures opened the Sunday evening/Monday morning session at $16.250 an ounce, down from Friday's pit close of $16.258 an ounce. At the open, prices quickly fell to an early session low of $16.165 an ounce. Prices have recovered since the open and as of 9:12 p.m. EST March silver was trading at 16.275 a ounce.

Analysts at HSBC said in a recent note that they expect prices will continue to fall in the near-term as the U.S. economy picks up momentum. This was reflected in the stronger-than-expected employment numbers, adding expectations that the Fed will hike interest rates sooner rather than later.

“In short, the data are robbing gold of the oxygen it needs to fuel a rally,” HSBC said in a research note published Friday afternoon. “Against a powerful consortium of higher equities and rates, and stronger (US dollar), the appeal for gold as a perceived ‘safe haven’ evaporated.”

Looking at the U.S. dollar, analysts at Brown Brothers Harriman said that it remains king of the currency world.

“It continues to be supported by the divergence in growth and interest rate differentials,” they said in a note published Sunday. “In the coming weeks, it is difficult to envision anything that will undermine this general theme.”

Edward Meir, commodities consultant with INTL FCStone noted that they are expecting the gold market to struggle in the next three-to-six months. In a report published Sunday, he said that weaker energy prices “will lower inflationary expectations and increase real interest rates, yet another reason that we would be cautious about gold’s upside potential.”