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James Hyerczyk
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Gold

Gold futures are trading higher on Thursday, but pulling back from its high after the release of a better-than-expected government report. Earlier in the session, gold prices rose as the U.S. Dollar retreated from two-week highs and U.S. Treasury yields fell, with traders focusing on economic data for clues on the Federal Reserve’s strategy on monetary support going forward.

At 13:08 GMT, June Comex gold futures are trading $1792.00, up $7.70 or +0.43%.

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Thin market conditions ahead of Friday’s U.S. Non-Farm Payrolls report have contributed to this week’s volatile price action. Dovish comments from Federal Reserve members have helped underpin prices, while stronger-than-expected economic data has helped put a lid on gains.

U.S. Treasury Secretary Janet Yellen, a noted dove, also contributed to the volatility with two-sided comments.

Fed’s Rosengren Says It Is Premature to Talk About Tapering

Helping to support gold prices on Thursday are comments from Federal Reserve Bank President Eric Rosengren.

On Wednesday, Rosengren said inflation will be temporarily distorted this spring as the U.S. economy works through imbalances caused by the pandemic but the pressures should be short-lived and should not lead to a pullback in monetary policy.

“Despite the ebbs and flows of the data, inflation is expected to remain close to 2 percent over the forecast horizon,” Rosengren said during a virtual event organized by Boston College. “This does seem to me to be the most likely outcome, which should allow monetary policymakers to be patient in removing accommodation.”

For now, Rosengren said “significant slack remains in the economy” and made it clear it is too soon to start talking about reducing the Fed’s asset purchases.

“We need to have a substantial improvement for us to begin tapering. It is quite possible that we’ll see those conditions as we get to the latter half of the year,” Rosengren said. “But right now what we have is one really strong employment report, one quarterly strong GDP report. And so I think it’s premature right now to focus on the tapering.”

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Daily Outlook

After an earlier surge, gold prices appear to be consolidating as investors position themselves ahead of Friday’s U.S. Non-Farm Payrolls report. This report could set the tone of the market for the next month.

On Wednesday, ADP reported strong private sector numbers. On Thursday, initial claims for unemployment benefits fell sharply last week to 498,000, in another sign the labor market is getting closer to pre-pandemic levels.

There is nothing bullish per se in the news, but investors appear unwilling to give up until there is definitive proof that the Fed is getting ready to begin tapering its bond purchases.

For a look at all of today’s economic events, check out our economic calendar.

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