Banks Repeat 'Gold $3000' Forecast, Price Flat Before US Jobs Data
Wednesday, 12/04/2024 11:29
GOLD PRICES held flat in all major currencies Wednesday morning as political turmoil in France and South Korea left the bullion market unmoved while ahead of more jobs news in this week's slew of US labour data.
Both job openings and quits rose on the Jolts data released yesterday for October, suggesting that the US labor market remained buoyant.
South Korea's Kospi share index fell again today as President Yoon faced impeachment in Seoul after suddenly imposing martial law Tuesday, claiming that opposition parties were acting for Communist dictatorship North Korea, only to have it unanimously overturned by Parliament.
But European bourses edged higher, including Paris' Cac40, as France's Prime Minister Barnier faced a
vote of no confidence, likely meaning the collapse of his fragile coalition Government after opponents on the left and the right refused to approve budget deficit cutting measures in the 2025 Budget.
"Geopolitics and banking stresses remain supportive," says analyst Rhona O'Connell at brokerage StoneX, saying that "shadow banking" risks – identified as a threat to financial stability by the Bank of England in
its latest report – are "gaining more headlines as politicians express some concern.
"But in the short term the technical picture [for gold prices] has deteriorated with resistance from the 50-Day moving average at $2670, which is also a Fibonacci resistance level."
What's more, O'Connell adds, "economic numbers this week focus on US jobs (Friday) with the [growth in] Nonfarm Payrolls expected to rebound."
The start of New York trading today will bring the private-sector ADP Payrolls report for November, expected to show a slowdown in jobs growth.
But analysts then expect Friday's non-farm payrolls estimate from the Bureau of Labor Statistics to show a big rally from October's plunge to the worst net hiring since the
Covid Crisis began to ease in late 2020.
A drop in US Treasury bond prices today saw Washington's borrowing costs rise to 5-session highs on 10-year debt above 4.25% per annum, almost 0.1 percentage points above last weekend.
US investment bank Goldman Sachs this week repeated its $3000 target for end-2025, because "We don't see central bank demand slowing down...and with the Fed cutting rates, investors are jumping back in, too."
Three-in-4 bets on mid-December's Fed decision now see the US central bank cutting the overnight cost of borrowing by one-quarter point to 4.38% per annum.
But the giant GLD
gold-backed ETF shrank for the 2nd session running on Tuesday, with shareholder liquidation taking it down to a 2-week low in size.
Betting on gold prices in contrast rose for the first week in 5 on latest data from US regulators the CFTC, with hedge funds and other 'Managed Money' traders expanding their net bullish bets 4.1% from what had been the smallest position in more than 2.5 months in the week-ending last Tuesday.
With the Dollar rising since Donald Trump's US election victory, emerging-market reserve managers "have to defend the value of [their] currency, so [they] don't really have that much cash available to go out and buy gold, and that's why prices have slowed down," reckons Francisco Blanch at US financial giant Bank of America, also
forecasting $3000 gold by end-2025.
The Dollar held firm Wednesday on the FX market, pushing its trade-weighted DXY index against other rich-world currencies up towards Monday's 1-week highs.
Crude oil extended its rally to 1-week highs above $74 per barrel of European benchmark Brent. But European natural gas erased this week's previous rally to 1-year highs, knocking 1.8% off the ICE exchange's Jan 2025 contract.
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