Gold prices are steady near yesterday's spot close in New York this morning, as the dollar continues to weaken and stocks fall on lower oil prices. Gold is trading in a narrow $7 range between $1210 and $1217, shrugging off this morning's employment reports. Oil is lower as OPEC fails to agree on production cuts, even though most people didn't expect anything to come out of the meeting.
Look for gold to hit first resistance at the overnight high of $1217. If prices manage to breach that level, $1222 comes into play. $1210 plays the role of first support, with the psychologically important $1200 being the next line in the sand.
The ADP private sector payrolls report (which doesn't track government jobs) says that the US economy added 173,000 new jobs in May. This was basically in line with analysts' expectations of 175,000 new jobs, and up substantially from April's 153,000. That April number got a big boost, as it was revised up by 10,000 jobs to 163,000.
First-time jobless claims were marginally lower last week, inching down to a five-week low. 1,000 fewer people filed for initial unemployment benefits last week, for a total of 267,000.
OPEC didn't really surprise anyone by not agreeing to a a production cap. Realistically, only Iran and Saudi Arabia have the capability to meaningfully increase production. The Saudis attempted to calm the nerves of the other OPEC members today, saying that they would not unilaterally increase production without notice. Surprisingly, the Saudis were one of the members suggesting a "group" production cap, meaning that all OPEC members together could only produce X barrels of oil a day. Iran's oil minister derided the idea, saying “A general quota for OPEC with no country quotas has no meaning.”
Crude prices were down around 1.5% after the OPEC meeting and before the EIA report on US crude stockpiles. The API crude stockpile report yesterday revealed a 2.4 million barrel gain, when analysts expected a draw-down. Those expectations were confirmed this morning when the EIA report showed a 1.4 million barrel drop in US stockpiles. The API report and the EIA report have had trouble lately on agreeing on the direction of crude surpluses.
The European Central Bank stood pat on monetary policy this morning, as expected. Some of the stimulus measures announced in March will actually start taking effect this month, so the central bank said that policy will stay the same until the effects of these stimulus effects can be felt.
Also in Europe, people are taking UK polls at face value, predicting a big win for the "Remain" camp in the Brexit referendum. Some experts note that the EU is less worried about the possible exit of the UK from the EU than they were last year when it looked like Greece would fall out of the union. To put this cognitive dissonance in perspective, Britain has the second-largest economy in Europe, right behind Germany. Greece is #17.
The overnight weakness in the dollar moderated some after the ADP payrolls and first-time jobless claims reports. The greenback is contributing marginally to headwinds against gold. Some analysts believe that currency markets are not properly pricing in a Fed rate hike for this month or next. The dollar is steady against the euro, but weakening once again against the yen.
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