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U.S. Labour Data and the Oil Prices are Key to Gold Prices

The U.S. Comex gold futures dropped $11 in the past two days and ended at $1,182.20 on Thursday. While the gold futures were up 0.66% for the week, the S&P 500 Index dropped 0.89%, the Euro Stoxx 50 Index fell 1.20%, and the Dollar Index declined 0.69%. The crude oil futures plunged 3.27% on Thursday to $58.94. The U.S. ten-year government bond yield fell 6bp from the recent high of 2.244% on Wednesday. However, the German ten-year Bund yield remains elevated at 0.588% on Thursday, up about 23bp for the week.

U.K. Election Out, U.S. Employment Report In
As of the time of writing, BBC forecasts that Cameron’s Conservative Party looks likely to win a slight majority, garnering 329 seats with over 50% of the votes counted. Cameron will then push ahead with the referendum whether the U.K. will remain in the EU or not. The market will now turn to the much anticipated U.S. April non-farm payrolls report, the average hourly earnings, and the unemployment rate on Friday. The recent U.S. ADP report shows the private hirings at 169,000 compared to 200,000 expected. The most recent Bloomberg survey reveals that 73% of the respondents expect the first rate hike to occur in September. China’s April trade data were worse than expected. Exports fell 6.4% year-on-year while imports contracted 16.2%, with the year-to-date trade value underperforming the government’s expectations.

Asset Allocation Shift
With the rise of the ultra-low Bund yield sparking a broader global government bond prices collapses, the investors have been shifting assets from bonds to equities this year. Measured in Euro, the gold futures have risen about seven percent this year. If oil prices continue to rise, markets may expect oil price-led inflation to resurface, supporting gold prices from here.

What to Watch
We will watch China’s aggregate financing and M2 data on 9 May, the Bank of England’s interest rate and asset purchases decisions and the Euro group meeting on 11 May, China’s April industrial production data and the Eurozone preliminary Q1 GDP on 13 May as well as the U.S. April industrial production data on 15 May.

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08 May 2015 | Categories: Gold

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