By Myra P. Saefong and William Watts, MarketWatch
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Gold futures rallied on Friday to tally their first weekly gain in seven weeks, as monthly data on U.S. employment showed strong growth, but didn’t provide any real surprises.
Gold for February delivery on Comex jumped $22.90, or 2.2%, to settle at $1,084.10 an ounce, off the session’s high of $1,088.30. That was the largest percentage and dollar gain since Aug. 20. Prices haven’t seen a settlement this high since Nov. 11, based on the most-active contracts.
The gold contract climbed about 2.6%, posting its first weekly gain since Oct. 16.
March silver rallied by 45.1 cents, or 3.2%, to end at $14.528 an ounce for a weekly climb of 3.4%.
The U.S. jobs report was largely in line with expectations and therefore already priced into the market,” said Tyler Richey, co-editor of The 7:00’s Report. So, “the shock of the underwhelming” European Central Bank announcement Thursday, and the subsequent price action in the currency markets, is the primary driver of the market right now.”
U.S. companies and government agencies added 211,000 jobs last month, topping forecasts for a nonfarm payrolls rise of 200,000. The ECB on Thursday unveiled additional economic stimulus measures , but they were less intensive than the market expected.
“Part of the reason for the gold rally is the inability of [the ECB President] Mario Draghi’s continued stimulus plan to curb the drop in [European] equity prices,” said Adam Koos, president of Libertas Wealth Management.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0768% strengthened following the disappointing ECB move, which in turn weakened the U.S. dollar /zigman2/quotes/210598269/delayed DXY -0.02% , providing a lift to dollar-denominated gold prices. Prices for gold marked their first gain in three sessions on Thursday.
“Correlation between the precious metals and the dollar has been rising recently as investors have been prepping for the first [Federal Reserve interest] rate hike in 10 years,” said Richey.
But “much like the long dollar and short euro trades have been, the short gold trade has been a crowded one recently, so heavy short covering” amplified the move higher for gold Friday, he said.
The greenback rallied on the back of the jobs data Friday but that didn’t have much of an impact on gold. The data all but guaranteed that the Fed will raise interest rates later this month.
For gold, $1,090 an ounce is a key level to watch, said Richey. Closing above that level would break the “’hawkish downtrend’ that began back in October following the FOMC announcement, and that would leave the technical outlook for gold more neutral, while remaining below would leave the path of least resistance lower for the near term.”
In other metals trade, January platinum spiked by $33.10, or 3.9%, to $880.60 an ounce, trading about 5.4% higher on the week, while March palladium gained $30.05 or 5.6%, to $566.85 an ounce, for a weekly climb of about 2.9%.
March copper closed up 1.8 cents, or 0.9%, at $2.079 a pound—roughly 1% higher for the week.
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