Gold hit by jobs report

Gold dropped $10 on the back of the strong ADP employment report, as it vindicates the Fed’s tapering policy.

Gold is trading at $1223, down 0.8%. The metal had been drifting lower throughout the session, but the news that the US had created 238,000 new private sector jobs pushed it still further south. Economists had expected an increase of only 199,000 new jobs.

Tomorrow the US will announce its initial jobless claims report, and on Friday the unemployment rate will be released. The US central bank has pegged its policy to the jobs market, and if unemployment continues to drop we could see gold give up more ground.

At 7pm tonight (London time) the Federal Reserve will release the minutes from its latest meeting, during which it decided to reduce the size of its bond-buying programme by $10 billion per month. The stimulus package assisted the US economy, but it also made gold more attractive to buy due to the softness of the US dollar. Now that tapering has begun we are seeing a negative impact on gold. If tonight’s minutes are on the hawkish side we could find gold heading towards the $1200 level.

Spot Gold chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.