Yesterday (12/1), the price of gold declined relatively, closing at $ 1,086.17/ oz, down 0.64% compared with the opening gold price at $ 1,093.94 /oz amid series of US economic indicators published and speeches by the vice President, Mr. Stanley Fischer have helped reinforce expectations of Fed rate hike.
1. The positive indicators
In the US, the number of Employment Opportunities and Labor Turnover (JOLTS) last month has been announced yesterday (12/1) for positive signals. The index is a leading indicator of overall employment, showed the number of the employed in the report, excluding the agricultural sector. Demand for new jobs in November accounted for 5.43 million, up sharply compared to the 5.38 million jobs during the previous month and exceeded expectation 5.41 million jobs. The labor market grows steady almost in line with forecasts of many experts, when non-farm payrolls in December also reported outstanding with the numbers 292.000 jobs created.
Besides, data on economic sentiment and NFIB small business index is not “less competitive”. Surveys give a positive assessment of the level of economic conditions which showed greater levels of previous figures, though not reaching the expected level, still were enough to make the bright spot in the US economic picture.
The economic indicators help bright outlook for the next rate hike by the Fed more reachable, simultaneously, strengthening greenback and making gold to leave the preferred position.
2. Prospects for the Fed to raise interest rates and the dollar strength
Also yesterday, the Vice president of the Federal Reserve had a speech on the impact of lower interest rates in the long term to normalize plan the Fed’s monetary policy. The Fed interest rate is associated with full employment and stable inflation at 2%. This equilibrium interest rate is said to be ideal to be raised once the shocks in the economy faded.
Last week, Vice President Fischer said in an interview with CNBC that Fed will have to raise interest rates 4 times in 2016. Higher interest rates are considered as factors that pushs down gold – assets not giving yields.
Before such developments, the US dollar index, a measure of the greenback’s strength versus major currencies basket of six others, have added 0.3%, to $ 99.34 peak points, hitting a peak of 12 months from December. The goods quoted by dollar such as gold, crude oil, which becomes more expensive for the buyers.
The strong USD pushed out of buying gold as demand for dollars will earn more income to investors than gold.
3. Oil drop
US crude oil futures have been traded below $ 30/ barrel for the first time since December 2003. Crude oil futures fell last month that more than 10% for the first time in years, amid concerns over China’s economic situation and the geopolitical tensions in the Middle East.
Inventory report from the US Energy Department showed that US crude oil inventories increased by 2.5 million barrels in the week ending on 8/1. While the global needs fuel proved weak, especially China and the region, “the factory of the world” is shrinking with fast speed. Oversupply caused oil prices to face the risk of breaking the bottom.
Oil dumping trend recently raised concerns about the possibility that oil prices would plunge further in the short term. Standard Chartered Bank predicted the future price of crude oil may drop to under $10/barrel.
Analyses of Group IF24H