Gold Locked at $1,740 as Bulls Seek Direction

By Barani Krishnan

AiVIF.com -- Call it “goldilocks” of the literal kind. Far from the concept of an ideal economic state where things aren’t expanding or contracting too much, the goldilocks here refer to gold practically being locked at $ 1,740 an ounce as traders try to discern the direction for the yellow metal.

Gold futures for August delivery on New York’s Comex were up $1.15 at $1,740.85 an ounce by 1:00 PM ET (17:00 GMT) Friday. For the week, it showed a drop of nearly 3.5% — its fourth in a row since the week ended June 10. The current week’s loss is also the sharpest since the week ended May 6.

Despite those gloomy weekly statistics, gold has shown resilience somewhat since Wednesday’s 10-month low of $1,730.70. Rebounding from that level, August gold on Comex has barely moved on either side of $1,740.

That, to some, was an indication that gold may already have, or is close, to bottoming out and probably has not too much more to lose.

Friday’s trade in gold was bogged by more uncertainty after the release of sterling U.S. jobs data for June.

The Labor Department reported that U.S. employers added 372,000 jobs last month — some 100,000 more than what economists expected — while keeping to a jobless rate of 3.6% for a third straight month. President Joe Biden later added helpfully from the White House that the United States has recovered all of the 20 million jobs it lost during the outbreak of the coronavirus pandemic between March and April 2020.

In theory, such revelations sounded great for the U.S. economy. But in a current inflationary like now — where the Fed needs the red-hot jobs market and wage growth to cool in order to reduce Americans’ demand for goods — it wasn’t.

For gold, there was an additional layer of complication: the Fed had already resolved to raise rates in July by 75 basis points, just like in June. With runaway jobs numbers like these, would the Fed be tempted to do more — although Friday’s fed funds rate continued to price in a 75 basis point hike for July? Or will the other three potential rate hikes scheduled for the year all be 75 basis points or even higher?

“The front end of the curve is telling us the Fed has the greenlight to relentlessly fight inflation, while the long end is saying a recession is brewing,” said Ed Moya, analyst at online trading platform OANDA.