Gold is holding near 6-year highs amid Friday’s non-farm payrolls (NFP) data. The yellow metal looks set to record another week of bullish gains after smashing through previous resistance at $1,360.
Prices have not rallied this hard since 2011 when investors were piling into commodities on the back of an epic decade-long bull run.
Traders are eagerly awaiting post-Independence Day data in the hopes of adding a 7th week of positive price action to the tally. Friday’s NFP numbers are expected to show a rise of 160 000 jobs in June, up from 75 000 in May.
Spot is relatively flat this week, after climbing 0.35% to $1,414.15 in London by 11:25 am on July 5th. Prices rose as high $1,439 on June 25th before traders took profits. Trading will be thin this Friday as market participants take the day off to extend the celebrations.
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The US economy has thus far bucked the global trend of tepid GDP growth. But now investors are pricing in an almost 100% chance of a July interest rate cut thanks to comments from Fed chairman Jerome Powell.
Lower interest rates typically favor bullion, particularly as the cost of money approaches zero. That and the latest bout of trade and geopolitical tensions are causing many investors to run for cover. Speaking with Bloomberg, Chris Weston, head of research at Pepperstone Group Ltd. said:
“The old cliche of putting 5%-10% of your portfolio in gold is something that we’ve been advocating for some time and that allocation could probably be taken up a little bit there.”
Weston cited both Bitcoin and Gold as plays with strong inverse correlation to the fed-funds rate and the global pool of negative yielding debt.
Negative Bond Yields through…
30 yrs: Switzerland
15 yrs: Germany, Netherlands
10 yrs: Japan, Denmark, Austria, Finland, Sweden
9 yrs: France, Belgium
8 yrs: Slovakia
7 yrs: Ireland, Slovenia
6 yrs: Spain
5 yrs: Portugal
3 yrs: Malta, Bulgaria
1 yr: Italy pic.twitter.com/QP9EwmNMvX— Charlie Bilello (@charliebilello) June 18, 2019
Gold 6-Year High Despite A Strong Dollar Capping Gains
Gold has largely traded sideways since mid-2013, at least against the US Dollar. While prices have not regained their former glory against the Greenback, the same cannot be said for other commodity-based currencies like the Canadian and Australian dollars.
Investors are paying top Ozzie dollar for gold as prices hold near all-time highs. An ounce of bullion will set you back $2,014 (AUD). Meanwhile, in the US, gold pundits have patiently been waiting for the precious metal to make its return.
Weston believes that time is now. Investors have little choice in fiat alternatives, including the rock-solid US dollar:
“Can you actually genuinely pick a G-10 currency that you say that’s really attractive right now? I don’t think you can, and I think gold’s been working as that kind of best house in a pretty shabby-looking neighborhood.”