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Gold Surges on Non-Farm Employment Data: Will Gains Be Sustainable?

Meera Shawn - Author

Nov. 20 2020, Updated 10:45 a.m. ET

Precious metals reversed paths

In the wake of the stabilizing economy, we have seen a downfall in precious metals that has been especially painful for gold investors. Gold continues to remain at its lowest level in approximately six years. Other precious metals have been hand in hand with gold, sliding down to severely low levels. Gold, silver, platinum, and palladium lost 5.67%, 4.19%, 6.13%, and 8.28%, respectively. On August 7, gold settled at the price of $1,094.1, silver at $14.82, platinum at $962.2, and palladium at $596.9.

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August 7 was an up day for precious metals, with the exception of palladium. The fall in precious metals prices is linked to the strengthening US dollar. The data release on August 7 played a role in bullion’s price movements. The below chart shows the relation of gold futures (GC) with the US Dollar Index (DXY).

Non-farm employment change backing the gold price gain

US data on non-farm employment came in about ~14,000 under the estimate of 223,000. Fewer jobs indicate a tightening labor market. Worsening labor markets curb consumer spending, which in turn could delay the Fed’s rate hike that is expected around September. Lift-off expectations affected the prices of gold and other metals. Gold reversed its path and climbed 0.36% on Friday.

The world’s largest ETF, the SPDR Gold Shares (GLD) gained 0.25% on Friday after having lost 6.14% on a 30-day trailing basis. The Miners ETF like the VanEck Vectors Gold Miners (GDX) and the VanEck Vectors Junior Gold Miners (GDXJ) also saw an up day and gained 0.22% and 0.19%, respectively. Mining companies saw mixed performances with a few gaining confidence in the gold price climb and a few others mourning the poor data.

New Gold (NGD) and Iamgold (IAG ) gained 5.18% and 4.7% on August 7, respectively. On the other hand, Sibyane Gold (SBGL) and Coeur Mining (CDE) lost about 8.02% and 7.17%, respectively. These stocks together contribute 5.96% to the VanEck Vectors Gold Miners ETF (GDX).


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