Dollar, Position Squaring Ahead Of Jobs Data Pressure Gold

(Kitco News) - Gold futures hit fresh two-month lows Tuesday afternoon, pressured by a muscular U.S. dollar and position squaring ahead of a key U.S. employment report at end of the week.
 
As of 1:38 p.m. EDT, Comex December gold was $11.50 lower to $1,315.60 an ounce. The metal fell as far as $1,315.30, breaking Monday’s two-month bottom of $1,317.20. December silver was down 19.9 cents to $18.66.

Meanwhile, the euro was down to $1.11437 from $1.11863 late Monday.

Gold came into U.S. hours with a softer tone, which analysts early in the day blamed on a stronger U.S. dollar as traders ponder whether the Federal Open Market Committee will hike U.S. interest rates this year. A number of Fed officials, including Chair Janet Yellen and Vice Chair Stanley Fischer, made hawkishly construed remarks at a central-bank symposium at Jackson Hole late last week. Then early Tuesday, Fischer told Bloomberg TV that the U.S. is “is very close to full employment.”

The market got an upbeat U.S. economic report around mid-morning. The Conference Board said its index for U.S. consumer confidence rose to 101.1in August from a downwardly revised 96.7 in July. Expectations had been for an August reading of around 97.0 to 97.3.

Gold is weaker with a slew of other precious and base metals plus crude oil, said one trader.

“I think it’s just a knee-jerk reaction to the dollar,” he said. “That was boosted by the consumer-confidence numbers.”

Some technical-chart damage was done to gold in recent sessions, said Sean Lusk, director of commercial hedging with Walsh Trading. Additionally, he said, some traders are evening positions ahead of the August nonfarm payrolls report due out Friday, as well as month end

This comes at a time when speculators collectively hold a large net-long, or bullish, position in gold futures, Lusk said. The most recent Commodity Futures Trading Commission report shows that the net long rose to 253,684 contracts in the week to Aug. 23 from 242,727 as of the week before.

“Everybody is repositioning themselves into this (jobs) report,” Lusk said. “When you have an extended long like that, they are going to take some profits. That’s exactly what’s has happened….Long-liquidation pressures are here.”

Lusk added that “the dollar being up is not helping.”

Despite recent hawkishly construed Fed comments, markets still do not expect policymakers to hike U.S. interest rates at their meeting next month, says Rob Kurzatkowski, senior commodity analyst with optionsXpress. He described expectations for December as a “coin flip” but pointed out that Friday’s report on U.S. nonfarm payrolls for August will be a key for the market, as that could sway market opinions on future Fed policy.

“A strong showing from the report could be seen a negative for gold prices and could result in further advances in the U.S. dollar index,” Kurzatkowski said.

Kurzatkowski listed “fairly significant near-term support” around $1,300 for December gold. This is not only a round psychological number but near the 100-day moving average of $1,302.20. Further, this is not far from the 50% retracement of the rise from the early-summer low to the July high, which comes in near $1,295, Lusk pointed out.

By Allen Sykora of Kitco News; asykora@kitco.com