Gold Tumbles as Dollar Gets A Rally That Makes Little Sense
Investing.com
Published Sep 02, 2020 03:12PM ET
By Barani Krishnan
Investing.com - If you’re a gold bull, you’ll be forgiven for thinking all logic’s gone out the window now.
Longs in the yellow metal took another hammering on Wednesday as both futures on Comex and the spot price of bullion fell more than $30 an ounce each in a selling spree that stretched from early in the New York session to the close.
The trigger? None too apparent, though the winner was clear: the dollar which enjoyed a boost despite an early reading into U.S. jobs numbers for August by ADP showing business payrolls rose by just 428,000 versus a median projection for a 1 million gain. German retail sales outperformed and European PPI year-on-year was mixed, yet the euro couldn’t beat the dollar.
The result was a Dollar Index that jumped 0.6% to reach as high as 92.87 after plumbing a two-month low of 91.737 just a day earlier. If anything, the dollar has become a full risk asset joined at the hip with stocks, which again enjoyed a rally on Wall Street — despite tumbling U.S. Treasury yields and a super-dovish Federal Reserve policy.
On Tuesday, gold futures hit $2,000 per ounce mark the first time in 10 sessions, before being pulled back down to a session bottom $30 below the day’s highs, as gold rebounded on a relatively-benign US ISM data.
“Gold made another push for $2,000 but once again came up short as the dollar staged another comeback,” said Craig Erlam, analyst at OANDA, who insisted that the greenback should be “on a downward trajectory (as) U.S. yields remain low.”
The benchmark December gold futures on Comex settled up down $34.20, or 1.7%, at $1,944.70 per ounce. It hit a high of $2,000.65 in the previous session.
The spot price of gold, which reflects trades in bullion, was down $28.90, or 1.5%, at $1,941.74 by 3:10 PM ET (19:10 GMT).
Wednesday’s ADP payrolls data came ahead of the U.S. Labor Department’s August jobs numbers due on Friday. The official numbers are expected to show non-farm payrolls grew by as much as 1.4 million last month, after a 1.76-million addition in July.
Prior to the Friday number, the Labor Department will first release weekly jobless claims on Thursday, which are expected to come in at 980,000 versus last week’s 1.006 million.
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