Gold struggles ahead of jobs report

Prices stall out ahead of Friday's monthly report on the US jobs market as a stronger dollar weighs on the metal.

By TheStreet Staff Sep 1, 2011 10:45AM

Gold © Comstock Images/JupiterimagesBy Alix Steel, TheStreetTheStreet


Updated at 3:15 p.m. ET


Gold prices struggled Thursday as a rally in the U.S. dollar weighed on the metal and as investors remained jittery ahead of Friday's jobs number.


Gold (-GC) for December delivery settled down $2.60 at $1,829.10 an ounce at the Comex division of the New York Mercantile Exchange. Gold traded as high as $1,833.60 and as low as $1,815.50 while the spot gold price was up by $3.20, according to Kitco's gold index.


Silver (-SI) prices lost 21 cents to close at $41.53 an ounce. The U.S. dollar index was up 0.4% at $74.47.


The minor rally in the greenback was weighing on gold prices, as the dollar-backed commodity becomes more expensive to buy in other currencies. The dollar as well as U.S. bonds were benefiting from a slight rush to safety as investors avoided stocks and booked profits in gold.


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Adam Grimes, director of tactical investments at Waverly, says there is no good fundamental reason why the dollar is higher but that it could be technical trading. "We've been short the dollar since December and we reversed that short yesterday," meaning that he bought the dollar to unwind the trade. If other traders follow suit, the dollar could see a short-term pop.


The big wild card for gold prices is the U.S. August jobs number that comes out Friday. If the jobs number is good, more confident investors may look to buy stocks instead of gold. But a better jobs number might also give the Federal Reserve less impetus to launch another round of quantitative easing, a hotly debated topic which is on the table for the two-day September meeting of the Federal Open Market Committee.


Any attempt by the Fed to pump more money into the system is typically good for gold, as investors, worried about subsequent inflation, buy the metal as a hedge against devaluing paper currencies. Rallies can sometimes be tempered, though, if investors look towards stocks, the biggest beneficiary of more quantitative easing.


If the jobs number Friday is disappointing, meaning that the private sector adds fewer than 100,000 jobs, the Fed can add that to the slew of negative data to support its case for more stimulus. The problem is that recent data have been so mixed -- factory orders and Chicago's purchasing managers index, for example, were all better than expected, while the Dallas Fed manufacturing index contracted sharply and weekly jobless claims continue to be high.


Uncertainty is hard for investors as they struggle to find a combination of safety and value. Those looking to gold will take advantage of price dips to buy, while those feeling better about the economy or who just want to cash in on the metal's recent rally will sell their gold positions.


A problem for gold, says Grimes, is that its traditional role as a store of value has changed as more speculative money has flowed into the market. As more "fast" money enters the market, gold could be subject to the same kind of volatility as the stock market. Both equities and gold could find themselves moving in the same direction at times.


There is "no good place to put your money," says Grimes, speculating that many are opting for cash. Grimes, along with many other chart watchers, is looking for a retest of the $1,650-an-ounce level. There has also been a pattern with the gold price where it has sold off overnight to then climb back into positive territory throughout the day. Grimes says that if that pattern is broken it's an "ominous signs for the longs."

A pullback could be a big buying opportunity for some investors. "History says you buy all the pullbacks," says David Banister, chief investment strategist at, who warns of extreme volatility between now and the end of October. "I would expect after this counter trend bounce . . . (that gold will) come down and retest the low $1,700s."


Banister also says that a potential headwind for gold is the stock market. If the S&P 500 ($INX) bottomed in August and is now in a long-term uptrend, perhaps supported by a QE3, then investors will opt for stocks. "People won't be as excited about gold."


Gold mining stocks were trading mostly higher Thursday afternoon. Barrick Gold (ABX) was gaining 1.8% to $51.64, while Newmont Mining (NEM) was adding 0.4% at $62.85. Among other gold stocks, AngloGold Ashanti (AU) was rallying 1.6% to $45.58, while Goldcorp (GG) was surging 2.9% to $53.41. 

Sep 1, 2011 3:03PM
Yeah and it's gonna "struggle" its way to $5,000 an ounce before these Washington/Wall Street clowns are done.
Sep 1, 2011 3:26PM

The day will come when the big investors are going to start dumping gold and take their profits. When that happens many of the small investors are going to lose big. Hope they don't look for the government to bail them out.

Sep 1, 2011 6:25PM

That's a wild looking, stretched out lemon with lips...heh,heh   Open-mouthed


Or is it a Kruggerand???  Confused  Money


I'm just waiting for the correction now, and we are ready to go back.  Nerd 


Cool looking face...........Martini glass

Sep 1, 2011 4:12PM
Gold means absolutely nothing, now.  It never did as this is done in concert with the manipulators.  All this about precious metals surviving this is just another way of saying you might have something to barter with later.  That is all this is.  Who in their right mind would pay 2000 an ounce for gold?  Answer, no one can afford it other than the same manipulators.  Just devaluing us and them in a deeper hole. 
Sep 1, 2011 11:22PM
Sep 1, 2011 3:34PM
Talk about excuses, Only in America is blame placed every where but where is should be, and We wonder why the county has become a country of whiners, could it be that gold like the homes are over priced and the bubble will soon burst, can't say that because people may start to bail out RIGHT ......
Sep 1, 2011 7:13PM

how to go about job hunting after "O"bambi lay's out his detailed job's plan.........Tongue out












do the exact opposite of what he proposes!! that 535 million boondoggle of a solar panel manufacturing plant say's it all!!  what did happen to that 535 million; and the owner STILL has his seat on "O"bambi's energy board......WT'F'??

Sep 1, 2011 4:17PM
I agree with Dennis the LeprechaunSmile
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