Gold continues its bullish ascent and the Direxion Shares Exchange Traded Fund Trust is better off for it. This week, the yellow metal made a 2-year high and it has weekly gains of 0.7%. This morning the yellow metal is holding steady as it trades flat at $1,360.60 an ounce in Europe. The bullion gained 0.2% to close at $1,360.80 on Thursday.
One of the reasons behind the recent consistency in bullion gains is that the U.S. dollar has been falling in global markets. The greenback has lost its footing against a basket of currencies this week and the Euro, Yen, and Australian Dollar have particularly strengthened against the U.S. dollar. Analysts at Market Anthropology notes that “considering that gold already trades close to $1400 an ounce while the dollar remains historically stretched. The prospects for precious metals continue to appear attractive to us as the markets catalytic converter for lower real yields has much further room to fall.”
All eyes on U.S. Job data today
The bullion has seen a strong uptrend following the release of an unimpressive set of economic data in the U.S. and the rest of the developed world. Today, investors are looking forward to the July nonfarms employment report due to be released later in the day. Many investors consider the employment numbers a good indicator of the economy and they’ll know if the economy is strong or weak when the data is out.
Economists believe that U.S. employers would have added 180,000 jobs in July. Economists also believe that the unemployment rate will fall to 4.8% from the 4.9% that held in June.
If the jobs number indicates a strong economy, Wall Street can expect the yellow metal to stay flat or trade lower. However, an uninspiring jobs number might suggest that the economy is still weak – a weak economy often sends investors running into the safe-haven that gold provides; hence, it won’t be surprising to see the bullion soar if the jobs data fails to impress.
Gold is set to rise on the wings of a “Perfect Storm”
Irrespective of how gold and the Direxion Shares Exchange Traded Fund Trust trades after the July jobs number is released today, investors can still rest in the knowledge that the yellow metal has an impressive upside potential ahead. The World Gold Council in its August Monthly report revealed that the bullion is on the verge of enjoying a renewed bullish flight as a perfect storm starts to build up in the economic landscape.
The perfect storm brewing in the economic landscape because investments are becoming less viable while attracting bigger risks. The WGC observed that “investors are starting to lose confidence in the effectiveness of unconventional monetary policies, following increasingly desperate bids by the world’s central banks to reflate the global economy.”
The fact that the Bank of Japan introduced new stimulus packages amidst tepid demand for government bonds suggests that investors are fed up with bonds. Earlier this week, the Reserve Bank of Australia reduced its benchmark interest rate, a move that will make bonds less attractive to investors because of lower yields. The WGC notes that, “In this environment, we believe investors are using gold to hedge portfolio risk as they add more stocks and low quality bonds to their asset mix.”