The Daily Market Report: Gold Retreats as Dive in Initial Claims Lifts Dollar

30-Apr (USAGOLD) — Gold slid back below the $1200 level in early New York trading, weighed by a sharp drop in initial jobless claims last week. This, along with a bigger than expected rebound in the Chicago PMI revived the dollar somewhat.

Initial jobless claims fell 34k last week to a cycle low 262k. This unwinds most of the gains in claims seen in recent weeks. Perhaps more importantly, it sets up some upside risk for April nonfarm payrolls and the jobless rate, which come out a week from tomorrow. Consensus for payrolls is +228k, although we might see that edge higher now. The unemployment rate is expected to tick lower to 5.4%.

Even if we see payrolls double from the dismal 126k print for March, the Fed is still unlikely to hike rates in June. If fact, yesterday’s terrible Q1 GDP advance report, adds considerable credence to the scenario that suggests the Fed won’t raise rates this year.

The dollar index, which fell to 9-week lows earlier in the session, has since rebounded. However, the gains have been less than 1% thus far. The harsh impact the strong dollar had on Q1 GDP has many now thinking the Fed needs to do something to undermine the greenback.

Renewed hope that Greece may reach some compromise with its creditors may be weighing on gold as well as risk aversion in Europe moderates. A recent poll shows that a decided majority of Greek voters believe the Tsipras government should cut a deal to keep Greece in the eurozone.

This may provide Tsipras with the political cover he needs to backtrack on some of the promises he campaigned on. Even if Greece is able to secure the next €7 bln tranche of bailout funds, it does not even come close to solving the problem that is Greece. It only kicks that can a little ways down the road.

Like other recent retreats into the range — driven by speculators in the paper market — this provides an opportunity to buy physical gold with an 11-handle. The underlying supply/demand dynamics in the gold market remain broadly supportive.