Gold Down 2% as Dollar Jumps on U.S. Jobs; Retreat Seen Temporary

By Barani Krishnan

Investing.com - Gold posted its biggest daily decline in two months on Friday, falling 2%, as the dollar rebounded on a better-than-expected recovery in U.S. jobs in July. The shiny metal’s prices, however, stayed well above the $2,000 per ounce support, indicating that its setback might be temporary.

The 0.8% rise on the greenback, the most in a day since March and which elevated the Dollar Index back above the 93.5 level, was also unlikely to be sustained, said forex analysts.

“We think that USD shorts were covered ahead of this report,” TD Securities said in a forex market note for the day. “A better data print now leaves the USD bid as tenuous. We see attractive risk/reward to lean short” the dollar.

The Labor Department said the United States added 1.8 million jobs in July, slowing from June’s 4.8-million jobs gain, as a new wave of coronavirus infections hampered the labor market recovery from the pandemic. Nearly 4.9 million Americans have already been infected by Covid-19 so far, with a death toll reaching above 160,000, according to Johns Hopkins University.  A model by the University of Washington has predicted 200,000 coronavirus deaths in the United States by Oct. 1, casting doubts on economic recovery. 

“The economic recovery is likely to struggle from here on out and that should keep real yields near their record lows,” said Ed Moya, an analyst at OANDA  in New York. 

“The dollar rebound was needed and will likely be temporary. Treasuries were due for a pullback and this will likely be temporary, too.”  

The front-month October gold futures contract on New York’s Comex settled down $40.40, or nearly 2%, at $2,018. On Thursday, October gold hit $2,070, record high for a benchmark gold futures contract on Comex.

In Friday’s trade, Comex’s December gold contract, which has attracted even more volume and open interest than October futures, settled down $41.40, or 2%, at $2,028. On Thursday, December gold surged to $2,089.20, an all-time high for any gold futures contract on Comex.

Spot gold, which reflects metal available for immediate delivery, meanwhile, was down $28.36, or 1.4%, at $2,034.82 at 2:50 PM ET (18:50 GMT) on Friday, after hitting a record high of $2,075.14 in the previous session.

Notwithstanding Friday’s declines, gold prices were still up some 32% or more on the year. Silver showed a gain of more than 52%.

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