PT. Equityworld Futures – The plunge in the gold price following strong US jobs data could be repeated over coming months, according to commodities analysts.

Gold fell 2.6 per cent from $US1200 an ounce on Friday after the release of US non-farm payrolls data on Friday night, and was hovering around $US1170 on Monday.

The data showed the United States added 295,000 jobs in February “ 55,000 more than economists were expecting. Furthermore, US unemployment dropped 0.2 of a percentage point to 5.5 per cent “ the lowest since May 2008.

“The non-farm payroll data has been a strong driver of the gold price over the last 18 months,” said UBS commodities analyst Jo Battershill.

“Something that was never a big driver of gold has now become a very big driver of gold.”

In addition, gold had breached an important technical level on Friday night’s plunge, which had triggered further selling, he said.

“$US1185 over the past couple of years has been seen as a major sort of support level. There was a lot of influence around that level so that in a lot of markets there would have been a lot of triggers on that value. I would imagine a significant amount of value would have gone through once it breached that level.”

Mr Battershill said the end of February through to July was traditionally a soft period for gold, which could see the price fall further.

“What’s holding it up at the moment is that we’re still seeing very, very strong physical demand out of China. The next four months will be a battle between [US interest rate rises] in the West and physical demand in the East.

“In the short term, you’d pick the interest rates on that.”

However, in the longer term Mr Battershill predicted Asian demand would put a solid floor under the gold price.

“Every time we see gold touch new lows in this cycle you see strong physical demand out of China and India. Will there be a cultural shift away from gold as a store of wealth in the East? I don’t think so.”

Gold is now 38 per cent off its September 2011 high of $US1900, although higher than its November 2014 low of $US1144.

ANZ commodities analyst Daniel Hynes said gold could reach $US1100 in the next three months.

“It’s come at a time when physical demand has been weak as well,” he said. “The headwinds for gold have been quite strong over the past few weeks and that payrolls number was the straw that broke the camel’s back.

“Our outlook for gold is fairly bearish at the moment . We’d be looking for prices to pressure the $US1100 level.

“Certainly in the very short term everything’s going against it … In the next few weeks or so there’s going to be some serious headwinds which will put downward pressure on gold prices.”

US interest rates and the US dollar were both rising, as were equity markets, he said.

“All that safe-haven buying support we saw at the start of the year has completely evaporated and is unlikely to return in the short term.”

But Mr Hynes said the long-term view for gold was better, with ANZ forecasting $US1280 an ounce for the end of 2015.

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