Wednesday August 09, 2017 10:40
(Kitco News) - Gold prices are recovering from post-jobs weakness and one analyst says the markets might have “overreacted” to the economic data point.

For that reason, he is maintaining his bullish stance on the yellow metal.

“Although the jobs market is clearly tightening, ‘everything else disappoints,’ including housing, retail, and the household and industrial sector, which have surprised to the downside of late,” noted Boris Mikanikrezai, precious and base metals strategist for FastMarkets, in his Gold Weekly report Wednesday. 

“In this context, I expect buying on the dips in gold to re-emerge sooner rather than later once the market finishes digesting the latest non-farm payrolls in the USA and starts focusing on the downside risks to the US economic outlook.”

Gold fell under pressure last week as the U.S. Labor Department announced 209,000 jobs were created in July, a much better print than expected. However, the metal has bounced back on renewed safe-haven demand amid rising tensions between the U.S. and North Korea. December gold futures last traded at $1,278 an ounce, up 1.22% on the day.

According to Mikanikrezai, gold bears are “in trouble” as there are factors working in the metal’s favor, including the looming U.S. debt ceiling debate.

“I suppose a sudden rise in VIX [volatility index] caused by the U.S. debt ceiling debacle may induce macro investors to hedge their portfolios and thus lift their long exposure to gold, as was the case in August 2011,” he said.

The last time the U.S. experienced a dramatic debt ceiling standoff in 2011, gold prices rallied to their all-time highs above $1,900 an ounce.

Mikanikrezai has been bullish on gold and SPDR GLD – the world’s largest gold-backed exchange-traded fund – since early June and said he has no reason to change his tune right now.

“I maintain my long GLD position with a stop loss at $112 per share (or $1,180 per oz if I had a long gold position in the futures market),” he wrote.

By Sarah Benali
For Kitco News