Gold traders turn bullish ahead of next week's U.S. payroll data

The U.S. Comex gold futures (COMEX:GCV13) fell 0.52% in the past two days but are still up 1.22% week-to-Thursday. The gold futures traded as high as $1,432.90 on Wednesday. During Friday morning in Asia, the prices traded lower at around $1,404. The S&P 500 Index rose 0.47% in the past two days after falling almost 2% on Monday and Tuesday. The Euro Stoxx 50 Index rebounded 0.57% on Thursday after plunging almost 3% in the first three days of the week. The U.S. Dollar Index rose 0.72% so far this week and surged 0.63% to 81.948 on Thursday. The crude oil futures fell to $106.98 on Thursday after reaching a high of $112.24 the day before.

Higher Revised U.S. Growth and Headwind to Emerging Markets

The U.S. real GDP expanded at a revised annualized rate of 2.5% in Q2 from the initial estimate of 1.7% while the prices excluding food and energy rose at an annualized rate of 0.8%. The labor market shows more strength as the weekly jobless claims fell 6,000 to 331,000, compared to 372,000 at the end of last year. The U.S. is expected to grow 2.5% in 2H 2013 as the sequestration effects wane. The Dollar Index jumped to a four-week high while the U.S. 10-year Treasury yield touched 2.8287% on Thursday from a low of 2.7032% during Asia's Wednesday morning, bringing the concern of tapering to the forefront again. As a result of the U.S. bond yield increase, capital flew out of emerging markets and caused countries such as Brazil and Indonesia to raise interest rates and sell dollars to defend their currencies, further slowing down growth.

Gold Traders Have Turned More Bullish

According to the CFTC, the managed money short positions dropped 13% while the long positions rose about 8% during the week ending Aug. 20. The net position at 73,216 contracts is the highest since Feb. 5. Geopolitical uncertainty, rising inflationary pressure from the oil price increase, and rebounding gold-backed ETP holdings have led to an increase in demand for gold.

What to Watch

Next week, we will monitor the August final PMI index for China, E17 and the U.S. on Sept. 3, the final Q2 GDP for E17 on Sept. 4, the interest rate decisions of the Bank of Japan, the Bank of England, and the ECB on Sept. 5 as well as the August U.S. non-farm payrolls and unemployment rate on Sept. 6, ahead of the all-important Sept. 17-18 FOMC meeting.

About the Author
Austin Kiddle

Austin Kiddle is a director of the London-based gold broker Sharps Pixley Ltd.

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