In the short term, the gold price remains a plaything for the volatile news situation and contradictory economic data.
After a positive start to the week, the cold shower followed on Friday for the gold price
Last week, US President Donald Trump shocked the stock markets by stating that he was not in any hurry in terms of trade deal. In addition, there were signals from the US Department of Commerce that the US was ready to actually introduce the additional tariffs on Chinese imports announced for December 15, unless there was a “Phase 1 deal”.
The then rising risk aversion of investors also flushed money into the gold market and raised the price of the yellow metal on Tuesday again on the existing since the beginning of September downtrend line of the flag formation.
On December 4, then came the cold shower for the price of gold, after a large news agency launched the message that not only a deal with the parties in the Sino-US trade war, but could even agree on the issue of rescission of existing duties , These statements were not officially confirmed by either Beijing or Washington. Nevertheless, the rise in the price of gold was initially slowed down.
On Wednesday, then came very bad numbers from the private sector labor market in the US by the data provider ADP for the month of November, which initially fully confirmed the picture of a cooling US economy. According to the report, only 67,000 new jobs were created outside the agricultural sector in the US last month, while 140,000 jobs were expected. The Automatic Data Processing (ADP) service provider bases its monthly survey on some 400,000 US companies with approximately 25 million employees and uses a methodology similar to that used in the US Labor Department (BLS), which usually provides the official labor market report published two days later. Therefore, the ADP report is usually considered a fairly reliable indicator of US government figures. Not so this week: On Friday at 14:30 clock delivered the BLS extremely strong numbers that amazed the audience and the rally in the gold price collapsed again.
The US business channel CNBC even got carried away by the phrase: “It’s a blowout jobs report”. More than 266,000 new jobs were allegedly created in the US in November, 254,000 of them in the private sector alone. How this extreme deviation to the privately collected numbers comes about, remains a mystery of the state statisticians of the BLS. The detailed analysis of the data can be found here.
It is likely that special effects from the strike at General Motors and temporary attitudes surrounding the Thanksgiving shopping spectacle (including “Black Friday” and “Cyber Monday”) have occurred in US retail and logistics companies. The strongest value since January of this year can not be explained in any other way, as the slowdown in the US economy was clearly reflected in recent months in labor market data. The extent to which the current figures were distorted by special effects will be shown over the next few months.
It will be exciting again next week
On Thursday, December 12, two important events for the gold market are on the agenda. On the one hand, parliamentary elections are taking place in the UK, the outcome of which is still completely open. Prime Minister Boris Johnson’s Conservative Tories, along with the Brexit Party (BP), hold 46 percent of the vote. Just like the anti-Brexiteers of Labor and Liberal Democrats (Lib Dems). It threatens a new stalemate in the British lower house and thus a continuation of the never ending story of Brexit.
Also on December 12, the new ECB President Christine Lagarde will hold her first press conference following the interest rate meeting. In addition to statements on the current monetary policy decisions of the ECB Governing Council and the current government bond purchase program amounting to EUR 20 billion per month, statements are expected from her on the review of the ECB strategy and the reorientation of European monetary policy towards climate change. The President of the Bundesbank, Jens Weidmann, is, like many others, strictly against a “green monetary policy”. In particular, the question of whether the ECB can reconcile economic governance via monetary policy with its mandate in a central-planning manner is already triggering heated discussions.
If you look at the headlines in terms of trade deal from a year ago, they should be a pointer to what could happen again on 15 December this year. Just on this date 12 months ago, tariffs of US $ 200 billion on Chinese imports to the US should be charged, but then postponed to March of 2019. In view of the recent predominantly weaker economic data from America, it can be expected that President Trump will not initiate any further tariff escalation. At the same time, however, most of the existing duties are likely to remain in force. Both sides are unlikely to agree on China’s agricultural orders with US farmers, which are the main component of a Phase 1 deal. For the time being, the burden on the world economy, including the uncertainty about the imposition of further US tariffs on trading partners in the future, such as recently against France, Argentina and Brazil, has remained with the existing tariffs.