Why Are Gold Buffs in a Risk-Off Mode?



Unemployment claims

The U.S. Department of Labor reported the unemployment claims on Thursday, October 1. According to the data, the number of individuals who filed for unemployment insurance for the first time during the past week rose by 10,000 to 277,000 from the previous week’s total of 267,000. The data were expected to rise by 3,000. The actual figure was higher than the forecast. This can dent the country’s currency. It could cause the DXY Currency Index to fall. The index measures the dollar’s strength against a trade-weighted basket of six major currencies. The index was steady at 96.44 and almost traded flat. It marginally gained 0.01%. The strengthening US dollar can be negative for gold lovers. It becomes more expensive to buy dollar-denominated gold.

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Risk-off mode

Company payrolls rose by 200,000 in September. This beat the 190,000 median forecast of economists surveyed by Bloomberg. The FOMC (Federal Open Market Committee) members indicated that the rate hike move would likely depend on the improvements in the labor conditions during their dovish September meeting. Rising interest rates would likely hurt gold buffs. Gold would lose its allure among interest or dividend-bearing investments like bonds and equities. Investors stayed and are in a risk-off mode. They aren’t taking an extremely long or short position in gold. Traders are considering a 43% chance that the Fed will move the rates in December and an even smaller chance of 16% in October.

The slowing manufacturing sector in China added fuel to the fire and likely resulted in a bloodbath for commodity lovers. Stocks that are impacted due to the fall in precious metal prices include Hecla Mining (HL), Kinross Gold (KGC), Gold Fields (GFI), and AngloGold Ashanti (AU). Together, these stocks account for 12.70% of the VanEck Vectors Gold Miners ETF (GDX). GDX and SPDR S&P Metals and Mining ETF (XME) saw a fall in their prices due to the carnage in gold prices.


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