Analysis: Uncertainty to dominate gold market this week

Analysis: Uncertainty to dominate gold market this week

6 July 2015, 09:53
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This week gold will be ruled by uncertainty, as markets will have to digest disappointing U.S. nonfarm payrolls released Thursday, as well as Greece's referendum results which showed citizens rejected creditors' proposals.

Comex August gold futures finished their second consecutive week in negative territory. Prices remain near the bottom despite a weaker-than-expected expected jobs report.

Wall Street vs Main Street Weekly Gold Survey conducted by Kitco News, signaled that most retail investors stay bearish on the precious metal while market analysts are still uncertain.

As the upcoming week is bringing few economic reports, markets will mainly be digesting June employment numbers.

The U.S. Bureau of Labor Statistics said on Thursday 223,000 jobs were created in June, up from May's downwardly revised number of 254,000. The unemployment rate fell to 5.3%; but this was mostly due to a falling participation rate to 62.6% from May’s rate of 62.9%. Data also showed that wage growth stagnated last month with average earnings unchanged at $24.95 an hour.

Head of commodity strategy at Saxo Bank Ole Hansen said that gold could rally next week as he expects the Fed to be less hawkish following the June jobs report. He added that he also sees some technical support for the yellow metal as there appears to be little follow-through selling below $1,163 an ounce.

Senior market strategist at CMC markets Colin Cieszynski agreed that gold may be higher he would expect gold to move higher next week as the data does not support a Fed rate hike in September, noting that a weaker U.S. dollar should also help boost gold higher.

Meanwhile, many analysts do not expect June numbers to shift fundamental outlook.

Gold strategists were disappointed that Greek turmoils, including the default and capital controls, hardly influenced gold.

It appears that gold has fallen out of favor with investors as it appears that the U.S. dollar and U.S. government bonds are now the safe-haven of choice while gold is not on the list anymore, said Seak Lusk, director commercial hedging division at Walsh Trading.

However, Adrian Day, president of Adrian Day Asset Management, considers that investors shouldn’t be so quick to dismiss gold’s poor performance during the crisis.

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