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Gold, Silver Prices Higher Before Crucial August Jobs Report

September 1, 2016 at 17:33 by Andrew Moran

Gold and silver prices are trying to rally ahead of the August labor report and the Labor Day long weekend. After new reports suggested that US manufacturing activity fell below expectations, the precious metals went up, reversing the week’s major declines.

December gold futures jumped 0.47%, or $6.20, to $1,317.60 per ounce at 17:05 GMT on Thursday. The yellow metal has been on a downward trend ever since the Federal Reserve said the case for a September rate hike has “strengthened.” Over the past week, gold prices have fallen to their lowest levels since June 23.

Silver is also heading upwards. December silver futures rose 1.41%, or $0.26, to $18.97 an ounce. Silver has been tumbling alongside its metal companion. Silver had a terrible August as prices dipped 8.1% since the start of the month.

Prices for precious metals are rallying just before the long weekend as domestic manufacturing activity diminished. The ISM manufacturing survey declined to 49.4, far below expectations of 52. Any measurement of under 50 is a signal of contraction.

Investors also paid attention to last month’s auto sales, which dropped 3%. It is an important metric pertaining to US consumer spending.

The decrease in US manufacturing has some traders questioning if the US central bank will go through with an increase to interest rates later this month. Analysts say the biggest data point contributing to the Fed’s decision will happen on Friday. This is when the August jobs report is scheduled to be released by the Department of Labor.

If the labor numbers are positive then it could provide the Fed with further ammunition for a September rate hike. This does not bode well for gold since the yellow metal does not provide any yield and the holding costs become greater for investors. In an environment of rising rates, investors, both foreign and domestic, seek out investment options that offer up higher yields.

The odds of a rate hike was as high as 40% earlier this week. Now those odds have slipped to 34%.

The next Federal Open Market Committee (FOMC) meeting will be held on September 20 and 21.

If you have any questions and comments on the commodities today, use the form below to reply.

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