Gold is trying to recover some of the losses it endured at the end of last week after Friday’s US jobs data came in way above expectations.
Gold had surged above $1,900 an ounce and remained there for most of January on the prospect of the Federal Reserve soon ending its policy of interest rate hikes to curb persistently high inflation. The danger for gold was that the price was reflecting a state in the future rather than the facts on the ground as they were currently and the precious metal, therefore, needed every data point to align with where sentiment had mapped things out.
The massively positive jobs figures out of the US delivered the shock that gold investors were fearing as the strong state of the world’s largest economy gives the Fed plenty more room to continue its policy of rate hikes without fearing triggering a recession. With more hikes now likely, gold has suffered due its lack of yield making it less attractive at times of rising interest rates.
After plummeting about $90 an ounce on the back of Friday’s news, the strength of the support for gold will be tested over the coming days to see how quickly it can recover some of these losses at close back in on $1,900 an ounce. The plunge is a timely reminder of the risks of trading on sentiment rather than facts.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.