Gold 9 week Highs on Friday Amid A Stronger Dollar

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Gold 9 week Highs on Friday Amid A Stronger DollarGold Silver Reports ~ Gold retreated from nine-week highs on Friday amid a stronger dollar, as China halted a week-long equity rout and a mixed U.S. jobs report provided further ambiguity on the timing of the Federal Reserve’s next interest rate hike.

On the Comex division of the New-York MercantileExchange, gold for February delivery wavered between $1,092.30 and $1,112.20 an ounce, before settling at $1,100.30, down 6.90 or 0.62% on the session. With the mild losses, gold ended a five-day winning streak which dated back to the final trading day of last year. The precious metal is still up nearly 5% from its level from early-December, when it fell below $1,050 to hit fresh six-year lows.

Gold support at $1,046.20, the low from Dec 3 and was met with resistance at $1,134.70, the high from November 3.

On Friday morning, the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) said in its December national employment report that nonfarm payrolls surged by 292,000 last month, significantly above expectations for a consensus gain of 200,000. The Labor Department also upwardly revised gains over the prior two months by 50,000, boosting new job totals to 252,000 in November and 307,000 in October. Before last month’s historic interest rate hike by the Federal Reserve, Fed chair Janet Yellen indicated that increases of around 100,000 per month this year would be enough to show that the nation’s labor situation had stabilized.

Within the report, jobs in the Professional Business Services category soared by 73,000, providing a leading indicator for future hiring. The construction sector also added 45,000 position, amid unseasonably warm temperatures. In addition, a spike of 34,000 in temporary jobs provides the Labor Department with further optimism for a larger dip in unemployment in the near future.

The unemployment rate remained unchanged at 5.0%, in line with consensus estimates. The U-6 unemployment rate, a broader gauge of the nationalemployment situation, also stayed unchanged at 9.9%, remaining near its lowest level since May, 2008. The reading, which measures the total level of unemployed workers plus those marginally attached to the labor force, stood at 11.2% last December. The indicator also accounts for workers who are no longer looking for a job, but have looked for one over the last 12 months.

By comparison, the alternative measure of underemployment peaked at 18% in January, 2010, as the nation continued to recover from the Financial Crisis. The U-6 rate is a preferred measure of unemployment by the Fed, as it embarks on its first tightening cycle in a decade. On Wednesday, the minutes from the Fed’s December meeting showed that the U.S. central bank plans to raise rates gradually this year, as inflationremains stubbornly below its 2% objective.

Still, there was some cause for concern throughout the report. Last month, average hourly earnings were flat, falling below consensus estimates of a 0.2% increase. The Labor Force Participation Rate also inched up modestly by 0.1% to 62.6%. While the number of job gains eclipsedanalysts’ expectations by a wide margin, nearly 40,000 were in the Food Services and Drinking Places category, which added almost 360,000 new positions in 2015.

Any rate hikes this year are viewed as bearish for gold, which struggles to compete with high yield bearing assets.
In China, the Shanghai Composite Index closed approximately 2% higher on Friday after the Chinese central~bank soothed markets by setting a higher daily fix in comparison-with the previous session. On Thursday, trading was halted within a half-hour after a circuit breaker was triggered for the 2nd time this week when the Index plunged 7%. A massive sell-off in Chinese equities this week led to the loss of $2.5 trillion in global equities over the first week of the year, The Telegraph reported.

Gold is viewed as a safe-haven asset for investors in periods of increased global instability.

The Dollar Index, which measures the strength of the green-back versus a basket of six other major currencies, gained more than 0.50% to an intradayhigh of 99.27. With several hours left in Friday’s session, the index was on pace to finish flat for the week.

Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Silver for March delivery fell 0.349 or 2.43% to 13.995 an ounce.
Copper for March delivery closed on Friday at 2.023 a pound, unchanged from the previous session. ~ Neal Bhai Reprts