Gold Prices To Remain Range-bound on US Dollar’s Bounce

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Gold price retreated by the end of the last week since it settled on Tuesday at $1,279.40. Its highest level since June 8. It ended the week down 0.4%.

Gold futures ended lower as the dollar jumped after a key report on payrolls in July showed stronger-than-expected job creation in the U.S. The data rallied stocks and the dollar index, dulling demand for gold, which tends to move inversely to the dollar.

September silver fell 38 cents, or 2.3%, to $16.63 an ounce. It has dropped over four days as it pulled back from one-month highs hit Monday. Silver booked a decline of 2.5%, its steepest such drop since the period ended June 16 when it posted a 3.3% weekly slide.

A cheaper dollar is beneficial to precious metals investors using weaker currencies. Both markets are affected by interest-rate policy, as higher rates support the dollar but also dull the appeal of non yielding metals in favor of interest-bearing assets.

Record-high stock markets have lured investors to riskier assets away from gold, but analysts continue to wonder if those gains can be supported without implementation of the pro-growth pledge, most notably tax reform.

Metals traders are betting that the U.S. job creation data could keep interest-rate hike on the table for later in 2017, although the lack of wage inflation is seen keeping the debate for such a move heated among Fed members. Over the past 12 months, wages have risen just 2.5%, showing little acceleration. Wages usually rise 3% to 4% a year when an economy was is running at full throttle.

Many market players look for the yellow metal to rise again next week. Gold prices will likely bounce after initial weakness in the aftermath of the U.S. jobs report. The current price break can eventually trigger more buying.

Gold could briefly fall to the mid to low $1,250s area, but then may remain underpinned by more “political chaos going forward. The current deep provides buying opportunity.

The market has also been helped lately by “strong buying” from speculators on pullbacks, with physical demand in India and other key buying nations reportedly soft. 

On the contrarian side, gold market wasn’t able to break above a technical trendline from the December low and the May low. The momentum indicators are also starting to roll over, highlighting the risk of lower prices.  The market appears to be stalling after recent gains.

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