Gold Modestly Higher, US Dollar Keeps Steady as Futures Rise

05 Feb 2021 · 3rd Party Analysis

WRITTEN BY ThorFX

In Summary

  • Gold recovers from yesterday’s lows
  • US dollar continues to advance in the currency market

Gold is trading modestly to the upside in the early hours of the European session on Friday. The precious metal reached a two-month low yesterday after dropping 2.7%, from $1,833 to $1,784. The decline was contained early Friday and gold was able to recover some of the losses as market participants drove the price to $1,800.

Gold has been in a downward spiral so far this year after reaching its highest for 2021 in the first week of trading. Gold bugs have had a difficult time trying to keep the upside momentum as the global outlook for 2021 continues to improve with the vaccination programs around the world picking up the pace. The year-to-date peak of $1,959 made on Jan 6 was met with strong resistance from the market, which so far results in an over 8% decline to the current market price.

The silver rally appears to have fizzled out on Friday after reaching its highest point on Monday. The top of $30.04 marked an 8-year high, following the strong buying wave by retail traders. The current market price of silver is hovering towards $26.50, a 12% decline from Monday’s top. Year-to-date, silver is trading to the downside, lower by 2.50%.

Concerns for the US Jobs Market

The US dollar keeps advancing against its competitors this week. The EURUSD pair is in its fifth straight day of losses, marking a decline of 1.50% so far in the week. The current price of the EURUSD, 1.1950 to 1.1960, marks a two-month low for the pair as market participants could be repositioning their trades ahead of the NFP data to be revealed later today.

The key economic data, non-farm payrolls, and unemployment rate are scheduled for 08:30 are EST. The payrolls report will show how the economy fared for January. Both gold and the US dollar are usually volatile at the time of the data release as traders and investors digest the news. In December, the US Labor Department announced that the US lost 140,000 jobs, the first negative jobs report in eight months. The disappointing data raised concerns that the jobs market could be entering into a period of decline. On Thursday, the US released its latest initial jobless claims. The figures came in better than expected at 779K vs the consensus from Wall Street at 830K. In comparison, the prior figure showed 812K.

The markets continue their ascend to higher grounds as global risk sentiment appears well justified by the anticipated $1.9tn US economic stimulus package and the progress with the coronavirus vaccinations. US equity futures today point to a higher open, bound to continue their climb for a fifth-straight day. On Thursday, all major US indexes closed in the green by over 1.00% led by the Nasdaq Composite, up 1.23%. The Dow Jones Industrial Average and the S&P500 rose by 1.08% and 1.09%, respectively.

European markets also remain well supported on Friday, continuing their positive performance this week. The German DAX, the French CAC40, and the UK’s FTSE100 are trading moderately to the upside today.

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