Gold Rides the Momentum Rally

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Global goldrose to its highest price in 11-months, trading close to $1,800 per ounce, as the inflation-hedge appeal of bullion was bolstered by signs that the European Central Bank intends to keep its borrowing costs low.

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,333.44 tons, as on Oct. 4. Silver holdings of iShares silver trust, the largest ETF backed by the metal, declined to 9,920.18 tons, as on Oct, 2.

The dollar index, which measures the greenback against a basket of six currencies, fell to 79.376, down from 79.967 late Wednesday.

ECB President Mario Draghi said “the euro is irreversible.” He also said the ECB is ready to buy the bonds of troubled euro-zone economies that ask for it.

ECB President also said that Spain is making progress towards getting its finances under control.

The momentum rally has seen extended at the Globex at present with sights set firmly on the key $1800 mark. Asian equities also rallied after Draghi’s pledge eased some tension of European debt worries. Euro is also trading high which would have added more support to the metal. Going ahead, we would expect gold to remain steady ahead of the mostly eyed US nonfarm payroll, the first time labor sector report after September 13. 

The largest over-the-year employment increase occurred in Northern New Jersey (+117,900), followed by Los Angeles, California. (+103,000), and Texas (+89,500). Analysts expect an average of 100-105K jobs addition will be there which may not be sufficient for the US to maintain the target labor sector growth. According to the Fed minutes of the meeting, US may have to do more than bond purchase. This would therefore be a supportive factor for gold during the evening hours. Gold holdings by the ETPs also rose to a record high yesterday, indicating growing demand for the metal.

Silver futures prices have also maintained the momentum rally at Globex. Asian equities are trading higher taking cues from the US equities amid optimism of the ECB’s pledge on government bond buying. Euro is also trading strong which will be supporting silver for the day

This morning the Bank of Japan, held rates and policy, while the BoE followed the ECB yesterday doing the same. The major event of the day, which might have affects on bullion, is the upcoming US nonfarm payroll report.

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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