By Barani Krishnan
Investing.com - Gold was headed on Friday for its best week since October as a shockingly low U.S. payrolls number for last month, coupled with the yellow metal’s belated catch up to U.S. inflationary trends, put it on a course to a weekly gain of 3.5%.
Price-wise, gold was nearing peaks last seen 12 weeks ago, closing in on the $1,850 per ounce level, that could set up a return to $1,900 and ultimately the $2,000 record highs attained in August.
“Gold’s short-term momentum could make a run towards the $1,857 level, which could be followed by a move towards the $1,925 resistance level,” said Ed Moya, head of research for Americas at online trading platform OANDA.
Benchmark gold futures on New York’s Comex was up $16.25, or 1%, to $1,832.05 an ounce by 12:53 PM ET (16:53 GMT). The session high was $1,844.40. For the week, gold futures showed a 3.3% gain, the highest since the week ended Oct. 29.
The spot price of gold rose by $16.18, or 0.9%, to $1,831.36, after a peak at $1,843.36. For the week, spot gold printed a much higher gain of 3.5%.
Traders and fund managers sometimes decide on the direction for gold by looking at the spot price — which reflects bullion for prompt delivery — instead of the futures.
“Gold appears poised to hit $1,850 which will be the 200-Day Simple Moving Average,” said Sunil Kumar Dixit of D.K. Dixit Charting in Kolkata, India. “From there, it could head up to $1,877, which would mark as a 50% Fibonacci retracement level of the move from the $2,075 record high to lows of $1,676.”
After months of anemic prices, gold suddenly broke out on Thursday, playing catch-up to the rally in a horde of commodities from oil to copper, and even coffee, that had reacted to inflationary pressures building since the start of the year.
Friday’s rally in gold came after the Labor Department reported that the U.S. unemployment rate rose to 6.1 percent in April as the country added a sharply lower-than-forecast 266,000 jobs in a pandemic-suppressed market.
The United States lost more than 21 million jobs between March and April 2020, at the height of business lockdowns forced by the coronavirus. More than 8 million of those jobs have not returned, officials say.
Economists polled by U.S. media had expected as many as 1 million new jobs for April, building on March's gains of 916,000. That made what the Labor Department reported disappointing for many.
“There's a bit of disbelief around this number,” said economist Adam Button, commenting on a post on ForexLive. “I wonder if this is a game-changer and shifts the conversation towards the Fed's baseline about rates staying very low for a very long time along with only-transitory inflation.”
The Federal Reserve has kept U.S. interest rates at between zero and 0.25% since the outbreak of the coronavirus pandemic last year, with Chairman Jerome Powell arguing that the rise in price pressures in recent months were temporary trends that would abate over time.
Analysts said while the latest jobs report itself was a damper for inflation, it nevertheless kept up the theme of monetary accommodation by Fed, which was always positive for gold.
“Gold’s best friend is Fed Chair Powell and other doves that remain committed to the idea that temporary inflation won’t persist,” said OANDA’s Moya.