The price of Gold rebounded to around $1,310 an ounce on Friday after declining by 1.9 percent to $1,289 per ounce a day earlier. A previous report from Reuters indicated that the price of gold fell after the dollar strengthened over the decision of whether the European Central Bank will maintain its low interest rates over an extended period of time. In addition, the gold price was also impacted by the strong labor market report in the United States.
According to Marc Ground, analyst at Standard Bank, gold is experiencing a relief rally. He said, “Going into the number there was a lot of positioning for a strong result, which pushed gold down … so we are now having a relief rally.”
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Projected gold will remain above $1,300
He projected that the price of gold will remain above $1,300 per ounce because investors are still uncertain regarding the Federal Reserve’s plan in reducing its bond-buying activity, and the unemployment rate in the country.
“There is a bit of ambiguity in the numbers because the unemployment figure is at multi-year lows but all-in-all I think gold may be able to hold above $1,300 in the coming sessions as the data is changing what people were thinking about the tapering story and the timing of it,” added Ground.
The Federal Reserve did not provide any indication that it would soon end its $85 billion monthly bond-buying program during its policy meeting on Thursday. According to VIV Capital analysts, Andrey Kryuchenkov, the question to the Federal Reserve is when and not if it will implement its plan. He emphasized, “Persistently strong numbers will only add more pressure on the Fed to act, at least to reduce the monthly purchases.”
Unemployment rate dropped to 7.4 percent
The United States Department of Labor reported that employers in the United States added 162,000 jobs in July. The unemployment rate in the country dropped to 7.4 percent. However, the result is lower the 184,000 jobs median forecast of economist based on data compiled by Reuters.
The Federal Reserve previously stated that its policy is based on economic data, and plans to reduce its bond-purchasing program by the end of the year. Another economic indicator that will be monitored by the Feds will be the U.S. ISM non manufacturing PMI, which will be available on August 5.
The SPDR Gold Trust, the largest gold backed exchange-traded fund worldwide dropped by 0.7 percent to 921.05 tonnes on Thursday. Data from Reuters showed that top eight gold ETFs recorded outflows of 19 million ounces or approximately $25 billion based on current prices this year.