Good news for the US economy in the shape of a better than expected jobs report last Friday has caused some analysts to say that gold is now done with for the rest of the year.
Howie Lee, investment analyst at Phillip Futures, says the jobs report is bad news for gold and he finds it odd that gold has dropped in value despite the unrest surrounding Greece and Europe. The probability that the Fed will raise interest rates in June is growing higher and higher interest rates are a proven catalyst for a price drop in gold.
On Friday gold fell by no less than 3.6 percent after the announcement of 257,000 extra jobs added in January; the expectation was 234,000 jobs. This puts the number of added jobs north of a million for the last 3 months. With the rate hikes in sight, gold needs to prove itself.
A Higher Gold Price Regardless?
In the short term we will see the gold price go down further, in Lee’s opinion. Although gold will rally at certain points, the analyst expects that in the absence of serious political tension the downward trend will continue towards the end of the year.
Lee is not the only analyst that believes this, moreover. Chief market strategist at IG, Chris Weston, expects the gold price to drop as well; people are just looking for a return and it is clear that gold is not going to provide that for now, in his view.
Julian Jessop, head of commodities research at Capital Economics did note the following: whatever the theory books read, a change in the US interest rate cycle has rarely had a big impact on gold. The analyst expects gold to hit $1,400 per ounce by the end of the year.
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