Gold Is Losing Its Sheen: Where's It Heading?

(Continued from Prior Part)

The number of people in the US claiming unemployment benefits fell for the first time in the week ending July 10. The number fell by a solid 15,000 from the previous week to come in at 281,000. The figure also came in below economists’ expectations of 285,000 new claims. The four-week moving average was 279,500—a rise of 4,500 from the previous week.

Since weekly data could have statistical noise, analysts usually prefer the four-week average of jobless claims. The four-week average rose by 3,250 to 282,500. The strong jobless claims have come against the backdrop of a firming labor market in the US. This is evident in the falling unemployment rate in June. It fell to 5.30%. The strength of the job market depends on people having jobs with an income.

The labor market strength is positive for the economy and the US dollar. The Fed is closely watching this information along with other factors that will help it decide the timing and quantum of the rate hike. The timing of the rate hike impacts gold-backed ETFs like the SPDR Gold Trust (GLD).

Other affected investments include Eldorado Gold (EGO), Gold Fields (GFI), Newmont Mining (NEM), and Yamana Gold (AUY). The rate hike timing also affects ETFs that invest in these stocks like the Market Vectors Gold Miners ETF (GDX). Together, Newmont Mining and Yamana Gold account for 10.10% of GDX’s holdings.

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Browse this series on Market Realist:

• Part 1 - Why Are Gold Prices on a Free Fall?
• Part 2 - Greece’s Bailout Is Negative for Gold’s Safe-Haven Demand
• Part 3 - Gold Fell despite a Boost in China’s Gold Holdings