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James Hyerczyk

Gold is trading higher on Friday shortly after the cash market opening and the release of the U.S. Non-Farm Payrolls report. Driving the market higher is lower demand for risky assets driven by a sell-off in global equity markets. U.S Treasury yields are also lower due to safe-haven demand, while the U.S. Dollar remains strong despite a jump in the number of jobs in January.

At 14:55 GMT, April Comex gold is trading $1576.20, up $6.10 or +0.39%.

US Non-Farm Payrolls Report

Non-Farm Payrolls surged 225,000 in January, well above Wall Street estimates for a 158,000 gain.

Average Hourly Earnings rose 3.1% over a year ago to $28.44, ahead of estimates for 3% growth.

The Unemployment Rate ticked higher to 3.6%, but for the right reason as the labor force participation rate increased 0.2 percentage points to 63.4%, matching its highest level since June 2013.


US Dollar Rises

The U.S. Dollar rose against a basket of major currencies on Friday with a weaker Euro driving most of the upside momentum. The Euro fell to its lowest level since October on Friday after German industrial output for December recorded its biggest decline in a decade and strong employment numbers in the United States encouraged investors to buy the dollar.

US Stock Indexes Decline

Despite the release of better than expected jobs data, stocks are under pressure following a massive four-day rally. This type of price action suggests the market may have been overbought this week.

The selling pressure actually began in Asia, as China delayed the release of trade data for January. China’s trade data for January, that was supposed to be released early Friday, will be combined with February’s trade data, according to a Reuters report citing the country’s customs office.

Daily Forecast

Gold traders were betting heavily on a stock market decline throughout the week and it looks like the bet is paying off as Friday’s stock market weakness is driving gold prices higher despite a stronger U.S. Dollar.

Given the early reaction to the stock market weakness, lower Treasury yields and the rising U.S. Dollar, gold is likely to remain underpinned mostly be falling demand for risk.

This week’s stock market rally was primarily fueled by strength in Asia due to the impact of stimulus from the Peoples’ Bank of China. With Asia weakening ahead of the weekend, U.S. stocks could remain under pressure throughout the session. This could help give gold a strong upside bias into the close.

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