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Gold dips as ‘mind-blowing’ unemployment rate curbs haven demand

Web Editor | ConsumerConnect

Gold has posted the longest run of weekly losses since September 2019 as surprisingly better United States (US) job numbers provided further signs the global economy is picking up faster than anticipated, curbing haven demand by investors.

Report says a key gauge of payrolls rose by 2.5 million, trouncing forecasts for a sharp decline following a 20.7 million tumble the prior month. The jobless rate fell to 13.3% from 14.7%.

Naeem Aslam, Chief Market Analyst at Ava Trade, in an emailed message to Bloomberg said: “The US unemployment rate has shocked everyone because the number was much lower than the market expectation.

“This is a mind-blowing number and shows that the economy is improving.”

It was learnt that after climbing to a seven-year high in April, bullion’s haven appeal has weakened as more economies reopen awash with stimulus following Coronavirus lockdowns.

Global equities are near the highest since early March amid optimism for a quick economic recovery.

And holdings in gold-backed exchange-traded funds fell for the first time since April Thursday, June 4, ending the longest run of inflows in more than a year.

Gold futures for August delivery also fell 2.6% to settle at $1,683 an ounce at 1:30 p.m. on the Comex in New York.

Prices are down 3.9% last week, a third straight weekly drop, the longest losing streak since mid-September. Spot gold was 1.9% lower.

A Bloomberg Intelligence index of senior gold miners also took a hit, falling 4.7% so far in the week and heading for the worst such drop since March 2020.

The index was dragged lower in part by Agnico Eagle Mines Limited’s 13% decline in Toronto and Newmont Corp.’s 7.9% loss in New York.

Still, U.S.-China tensions, risks around the global recovery and expectations of more stimulus may support prices.

The European Central Bank announced a larger-than-expected boost to bond-buying on Thursday and investors are awaiting plans for the next round of U.S. stimulus, stated the report.

Metals Focus Director Nikos Kavalis said even though gold prices may face a near-term correction, the metal may climb toward a record in the second half of this year as yields remain low and real rates stay negative.

Some banks have raised forecasts on the metal.

J.P. Morgan Asset Management, for instance, changed its recommendation on gold and other precious metals to overweight, and Credit Suisse raised its price expectations, seeing the metal averaging as high as $1,800 an ounce in 2021, according to research note last Friday.

Both banks see US Dollar weakness and inflationary pressures supporting prices.

Holdings in gold ETFs are still near a record high, according to initial data compiled by Bloomberg.

Assets fell by 2.1 tonnes to 3,129.2 tonnes as of Thursday, though they are up more than 20% so far this year.

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