(Kitco News) - A shortened trading week, due to the Labor Day Monday, will add uncertainty to the marketplace as investors wait one more week before the much anticipated Federal Reserve monetary policy meeting.
While global market uncertainty could benefit gold prices in the near-term, an impending rate hike -- the first in rise since June 2006 -- will continue to weigh on the marketplace.
December Comex gold futures ended its second consecutive week in negative territory, but managed to hold key support levels, closing Friday’s session at $1,121.40 an ounce, down almost 1% on the week.
Silver prices performed slightly better this week, despite also ending its second consecutive week in negative territory. Comex December silver futures ended Friday’s session at $14.544 an ounce, relatively flat on the week.
Friday’s August nonfarm payrolls report did little to change economists’ expectations, which are split almost evenly, that the Fed will raise rates on Sept. 17. The report showed that 173,000 jobs were created in August, well below the consensus forecast of 217,000. However, revisions for June and July showed 44,000 extra jobs were created in the first two months of summer; at the same time, the unemployment rate dropped to 5.1%.
Economists at CIBC said in their Week Ahead report that the employment data, while not great, was good enough to keep the Fed on course to hike rates in less than two weeks.
Bart Melek, head of commodity strategy for TD Securities, said that fed funds futures are pricing a 60% chance of a rate hike, which is high enough to keep investors out of the gold market in the near-term.
“The gold market just doesn’t want to price out a rate hike in 2015 and I think, as a result, you will see weaker gold prices,” he said.
Even if liftoff is not in September, there is still two more monetary policy meetings left in 2015, October and December.
Colin Cieszynski, senior market strategist at CMC Markets, said that he is not convinced that September is completely off the table, which is why he is expecting gold prices to retest $1,100 gold in the near-term.
“Even if they don’t move in September, I think they will use the meeting to signal a move in October or December,” he said. “Nonfarm payrolls did nothing to knock the Fed off course from raising interest rates this year, so USD could rise and gold could drop back a bit in the short term.”
While some continue to see gold struggling in the face of a looming rate rise, other analysts are focused on the yellow metal’s potential. With little economic data to be released next week, many market professionals are looking for outside markets to predict gold’s next move.
Adrian Day, president of Adrian Day Asset Management, said that he is expecting to see gold prices consolidate in the near-term, after August’s strong performance.
“Were global stock markets to tumble again, then gold could rally sooner,” he added.
Other analysts note that the fact that gold was able to hold support above $1,117 an ounce could be positive for prices.
In U.S. economic data, the only report to garner market attention next week will be inflation data with the release August’s Produce Price Index.
By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow me on Twitter @neils_C
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