Rua Gold Inc. (TSXV: RUA, OTC: NZAUF, WKN: H8E)
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The U.S. Bureau of Labor Statistics released its latest report on Friday, showing that the U.S. non-farm payrolls increased by 254,000 people in September, far exceeding the expected 147,000 people, as well as the 142,000 people reported in September.
After the release of the data, as the market is expecting to see Fed’s interest rate cuts pace slow down, gold futures and spot gold prices drop instantly, COMEX gold futures contract was down more than 1% during the session, while the dollar index jumped straight up. As the data also temporarily dispelled the market’s concerns about the U.S. recession, the impact of the three major U.S. stock indexes opened higher on Friday.
However, analysts remain generally optimistic about the precious metals due to rising geopolitical risks. Ole Hansen, head of commodities strategy at Saxo Bank, said the only reason why gold remained firm after the release of strong jobs data was the risk of a deteriorating situation in the Middle East over the weekend.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said today’s non-farm payrolls report boosted U.S. Treasury yields and the U.S. dollar, which would normally imply a bearish stance on gold. However, volatility and uncertainty could provide some additional support given the turmoil in the Middle East and the fact that the U.S. election is only a month away.
Adrian Day, president of Adrian Day Asset Management, believes that the gold market could see some fresh buying as Chinese buyers return after the National Day holiday. After two months of strong gains, gold should pause for a bit to take advantage of today’s U.S. jobs report. But until the fundamentals are re-established, the precious metal is not expected to see a long or deep pullback.
Jesse Colombo, an independent precious metals analyst and founder of the BubbleBubble Report, said that rising geopolitical tensions are providing good support for gold, and bullish volatility is increasing due to heightened concerns. He added that no one wants to short gold this weekend.
Lukman Otunuga, a precious metals research strategist, believes gold will be torn between digesting this week’s strong economic data and the chaos in the Middle East as there is relatively few economic data next week. From a technical analysis, short-term support is at $2,630 per ounce and resistance is at $2,675. Catalysts which could impact prices include ongoing geopolitical tensions, the U.S. Consumer Price Index, and speeches from a number of Federal Reserve officials.
According to analysts, the fact that buying continues at low levels means that gold remains in a strong bull market. With geopolitical uncertainty on the rise and a new Fed easing cycle on the horizon, global liquidity is increasing, making gold an attractive asset. In addition, gold also remains attractive as a monetary metal as global debt continues to rise.
Otunuga explained that from a technical point of view, gold looks overbought and in need of a 5% or 10% pullback, but the fact that prices are just moving sideways is a very bullish sign. The overall monetary policy stance of the Federal Reserve remains favourable to gold.
David Morrison, senior market analyst at Trade Nation, noted that the market believes the Fed will continue to cut rates until they fall back to around 3%, which should support gold. Regardless of the reason why Fed is cutting (whether due to inflation has been controlled or worried about the economy is heading into recession), gold should continue to be favoured until the current bull market is over.
The December gold futures contract on the New York Mercantile Exchange last traded at $2,669.10 an ounce, essentially unchanged from last week.
