Gold Trades Lower for a Second Consecutive Day but Does This Match Up to the Current Events

As of 5:05 PM EDT gold futures basis, the most active December 2021 Comex contract is trading down $7.80 and fixed at $1790.70. Considering the major new stories of the day it seems a little peculiar that gold would continue to trade under pressure. The following are some of the key events that occurred today.

From Reuters;
Reactions to ECB strategy review.

“The European Central Bank set a new inflation target on Thursday after an 18-month strategy review, hoping to bolster its credibility after undershooting its current objective for nearly a decade.”

Comments from analysts on ECB’s strategy review announcement. Christoph Rieger, Head of rates and credit research at said, “The inclination to tolerate higher inflation is deeply rooted in the ECB’s thinking. They are stressing the importance of having an inflation buffer … The bottom line is that real yields have hit record lows and that will continue.”

The ECB’s ‘phantom taper’?

– “We’ve had ‘taper tantrums’ and even ‘dovish tapers’, but the European Central Bank may deliver a taper that’s not really a taper at all.”

U.S. job openings hit record high as employers struggle to find workers

– “U.S. job openings raced to a new record high in July while layoffs rose moderately, suggesting last month’s sharp slowdown in hiring was due to employers being unable to find workers rather than weak demand for labor.”

Dollar pares gains on dovish Fed speak, before ECB meeting

– “The dollar pared gains on Wednesday as Treasury yields dipped after a Federal Reserve official offered a dovish outlook on the economy, and a day ahead of a European Central Bank policy decision … New York Fed Bank President John Williams said that more progress is needed in the labor market to achieve the “substantial further progress” for the Fed’s maximum employment goal.”

From Market Insider;
Delta variant concerns contribute to weakness on Wall Street
(RTTNews) – “The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, said the deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most districts. The deceleration in those sectors reflected safety concerns due to the rise of the Delta variant of the coronavirus, and, in a few cases, international travel restrictions.”

From Politico;

“Yellen warns of likely October debt cliff and incoming ‘irreparable damage’

“Treasury Secretary Janet Yellen warned congressional leaders on Wednesday that she expects the country’s debt limit will hit its breaking point next month, dealing a likely blow to the global economy without quick action.”

All of these articles are news stories written today for the most part represent dovish sentiment both from the European Central Bank and the Federal Reserve. Coupled with the fact that Friday’s jobs report was tepid at best with the actual numbers coming in well below estimates by major analysts polled by both Dow Jones and Bloomberg. With these things taken into consideration it seems unusual that the safe-haven asset, gold has reacted to the news by trading lower.

Jim Wyckoff, Senior Market Analysts and Columnist put it very succinctly in his article in Kitco news today saying, “The safe-haven metals bulls are stymied this week by the fact gold and silver prices have sold off in the face of some heightened risk aversion.”

Rather than making any judgments, I invite you the reader to look at the headlines and ask yourself if the recent fundamentals events and stories match recent price action in gold.

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Wishing you, as always, good trading and good health,

Gary Wagner