Compiled 09/07/12 6:00 AM (CT)
GOLD MARKET FUNDAMENTALS: (6:00 AM CST) The gold market got a big boost yesterday from ECB President Draghi's "unlimited" bond-buying plan. The news fed investor risk tolerance and lent support to the equity markets and metals in general. Strong private-sector jobs data and also lent support to the equities and helped them sustain their rally throughout the day, but it presented a mixed-signal to the precious metals markets. Traders are concerned that strong economic data would discourage the Fed from embarking on a quantitative easing program. Comments from the Fed last Friday stating that it was prepared act unless there were substantial and sustainable improvements in the economic data sparked a breakout move in gold. Gold is lower this morning, as traders are cautious ahead of the monthly jobs report, especially in the wake of the solid private number yesterday. China's announcement of a major new infrastructure investment program is supportive, as it means more spending and stronger commodity demand.
ETF holdings of gold reached a record high 2044 tonnes yesterday and are up 38 tonnes for the year. Comex Gold Stocks were 10.921 million ounces down 61,008.
If the payrolls number is better than expected, we might see a modest sell-off in gold, but a weak number could bring in more buying. The bulls seem to have more sway than the bears, and the trade is likely to lean on the Fed's statements last week which suggested that it would take more than a single strong jobs number to change their course. The dollar index falling to its lowest level since May overnight should lend some underlying support to gold.
OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) Asian equity markets were sharply higher during overnight trading, with the Nikkei up 2.20% and the Shanghai A Share index up 3.70%. European stock markets have posted moderate gains this morning, with Italian equities up by more than 2%. US stock indices are higher, while the Dollar is posting moderate losses. China approved plans for spending 1 trillion Yuan to improve its infrastructure. German Industrial Production during July was up 1.3%, higher than market expectations. UK Industrial Production during July was up 2.9%, also higher than market forecasts.
US economic data this morning includes August Non-Farm Payrolls, August Private Payrolls, and the August Unemployment Rate.
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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