By Paul Ploumis 05 Sep 2015 Last updated at 00:16:17 GMT
EDGWARE (Scrap Monster): Bullion prices whipped hard on the release of new US jobs data Friday, with gold initially spiking to recover this week's losses before dropping to fresh lows for the day beneath $1120 per ounce.
Losing 1.1% from last Friday in Dollar terms, wholesale gold bullion swung that much inside 60 minutes for Euro investors after the US Bureau of Labor Statistics said non-farm payrolls grew less than expected in August, but the overall jobless rate fell to a 7-year low of 5.1%.
"More than 12 million jobs have been added since the trough in early 2010," said US Federal Reserve voting member Jeffrey Lacker earlier, giving a speech entitled 'The Case Against Further Delay'.
"It's time to align our monetary policy with the significant progress we have made."
The odds of the US Federal Reserve raising interest rates from zero for the first time since 2008 at its September meeting rose to 34% from 26% before the data, according to futures market prices, with the odds of a first hike in October or December rising to 46% and 62% respectively.
But "while the Federal Reserve is succeeding in the employment part of its dual mandate," says a blog at US bond-fund giant Pimco, "it is significantly undershooting the inflation part", with the Fed's own preferred PCE measure reading just 0.3% against the 2.0% per year target, and only 1.2% when 'volatile' fuel and food are excluded.
Silver held firmer than gold bullion Friday, ending the week unchanged at $14.60 but fading 2.5% from yesterday's sudden spike near $15 per ounce.
Last month's rally in gold came as "Fading expectations of a September Federal Reserve rate hike, the decline in the dollar index [and] the approaching peak seasonal demand period further supported prices," says a report from commodities analysts at French investment and bullion bank Societe Generale.
But now forecasting 2016's average at $1000 per ounce, however, SocGen's natural resources research team put gold some 12% below where the futures market currently predicts next year's prices – one of only 5 bearish calls across the entire commodities complex.
In Dollar terms, "Gold has fallen back into a bearish trend channel that commenced in May," said a technical note from bullion bank Scotia Mocatta overnight.
"Given the failure to make a new high on the last rally, and the overall bearish long-term technical posture, we expect gold to test the lower range of the channel and the $1072 lows from July."
For Eurozone investors, "The ECB's QE will ensure a degree of uncoupling of monetary conditions from those in the US in coming weeks/months," says French investment and bullion bank Natixis, noting how the European Central Bank decided Thursday to raise from 25% to 33% the proportion of any one Euro nation's bonds in issue which it can buy with QE – meaning it "now has free rein to be able to increase the size of its Asset Purchase Program."
"Our economists [also] believe the ECB will further loosen its monetary policy," writes Carsten Fritsch, precious metals analyst at Commerzbank in Frankfurt, "and may already do so at its meeting in December."
With Eurozone QE increased to buy more than the current €60 billion of government bonds each month, "This would suggest a significantly higher gold price in Euros," says Fritsch, "even though the price response to what virtually amounts to an announcement of 'QE2' [at Thursday's ECB press conference] was subdued."