Gold Settles Up $28.00
Sean Lusk | Dec 06, 2015 03:12AM ET
February gold settles 1084.1, up $28.00 for the week of November 30, 2015 through December 4th
Gold prices rallied to their best levels in two weeks, buoyed by speculation that the Federal Reserve will raise rates at a considerably slower pace in 2016. While sentiment in the market points to a December rate hike of a quarter point, many in the market believe that future tightenings will occur at a snail’s pace. In fact, Chairman Yellen just yesterday said that tepid growth overseas coupled with divergent monetary policies between the U.S. and other nations will halt the Fed from hiking rates too quickly. Lower rates for longer are good news for gold, which pays its holders nothing and struggles to compete with yield bearing investments when rates rise. At the same time, investors are also reacting to Thursday’s sharp fall in the dollar against the euro, which came when The European Central Bank served up a package of stimulus measures that fell well short of many investors’ expectations.
This morning, Nonfarm payrolls increased a seasonally adjusted 211,000 last month, the Labor Department said. Economists surveyed by The Wall Street Journal had expected payrolls to rise by 200,000. Simply put, I believe precious metal traders awaited this morning’s jobs data before short covering and profit taking occurred. It is important to note that coming into this week that recent data from the Commodity Futures Trading Commission showed hedge funds and money managers raised their net short position in gold (bets the price will fall) to the biggest on record last week. "Assets in SPDR Gold Trust (N:GLD), the world's top gold-backed exchange-traded fund, are at their lowest since September 2008," said Reuters earlier this week. Gold recorded its biggest monthly drop since March 2013 in November 2015. In my view, this week’s rally in gold, which mostly took place following this morning’s jobs number, was short covering and profit taking. Should this type of action continue, I look for the market to trade up to the second resistance level next week at 1115.4 or the 100 day moving average that sits up at 1118.6, basis February 2016 futures.
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