To summarize, the “positive” unemployment numbers are making the Fed and other investors change their outlook on the US economy at least a little. If the “good news” continues — and we highly are skeptical of this — then inflation will likely become a larger concern to the Fed than cheap credit, meaning they could increase interest rates.
On Thursday, gold rose for the fourth consecutive day, reaching a three-month high. Its use as an inflationary hedge became more appealing as the dollar declined and expectations for easy monetary policies were widespread.
After learning that new unemployment benefit claims remained at the lowest level since the beginning of the recession, investors had a larger appetite for risk. Economic uncertainty regarding Greece also benefited bullion.
The Gold Prices are Rising.
According to Janney Montgomery Scott Chief Investment Strategist Mark Luschini, the recently secured Greek bailout led to fears regarding money printing by central banks. He said that many investors believe gold will ride “the wave of easy monetary policies” that they expect will be available, according to Reuters. We are now at a true pivot point. Gold is at a 50% retracement from its high ($1625). Historically, it has always bounced from here. But it could continue to go down as the dollar strengthens. Because all other currencies are weaker than the dollar + we still remain the reserve currency for the world. Until this changes down, we go. 60% would be $1550 which is realistic.
The increase in gold prices was also aided by the long-term refinancing program of the European Central Bank that infused the system with liquidity, said Mr. Luschini. By 3:32 PM Eastern Time on Thursday, the spot price had increased 0.2 percent, reaching $1,780.06 per ounce. Earlier in the day, it rose to $1,787.15, the highest price in three months. The fourth consecutive day-gain was the longest since early in January. And bullion cois prices are up. Try to buy gold or silver at current stock market (spot) gold or silver prices! Coins are 60% to 80% above spot if you can find coins and bulk rates are running 40% to 50% over spot.
On the U.S. Comex, spot gold settled at $1,753.30 per ounce, a $15 increase. According to preliminary data from Reuters, trading volume was approximately 25 percent under the 30-day average. Concerns regarding the economic outlook in the euro zone were eased by the euro’s 2 ½-month high against the U.S. dollar and unexpected positive data from Germany. Investors reacted accordingly, putting their money into both gold and silver.
Inflation hedge purchases of golden metal were triggered by an increase in crude oil prices. Increased western world tensions with Russia led brent oil to $124 a barrel. This nine-month high is not expected to be the pinnacle, as increasing prices are expected through the fall. Crude oil price gains have positioned U.S. gold futures for a gain of more than three percent this week. This would be the largest weekly rally since the end of January.
In New York, Comex options expired on Thursday, another factor that increased futures prices for the precious metal. The rally on Wednesday created some big in the money strikes, with many calls of $1,750 to $1,800. By late morning on Thursday, gold equities increased by approximately one percent, hovering at that level for the remainder of the day.
The break of the $1,750 resistance zone on Thursday after the level was tested on Wednesday was greeted positively. Many momentum traders were waiting for this break before moving into the market. After determining that the metal was likely to hold above that level for the day, the price increased. Subsequent bank sales of bullion took place at the key $1,780 level.
The market is now positioned for a resistance test at $1,800. If this gives way, the zone closes to $1,850 should be the next target.