Gold News

Weak US Jobs Data Sees Gold at 3-Week High, Dollar at 2-Year Low as "Fed Tapering" Switches to "More QE"

GOLD INVESTMENT prices leapt to a 3-week high above $1330 per ounce at the start of US trading on Tuesday, after new data showed US hiring to have been much weaker in September than analysts forecast.
 
The monthly US Non-Farm Payrolls report had been due more than two weeks ago. Released today after Congress's 3-month deal on the $16.7 trillion debt ceiling ended the shutdown of government services, it showed 148,000 net jobs being added by the US economy last month, below expectations of 180,000.
 
Prices for investment gold bars in London had already moved up $10 per ounce from an early low to $1320 ahead of the US jobs data.
 
"Market expectations seem to have shifted," said today's precious metals note from Standard Bank in London, "from December to April in terms of when the US Fed will start tapering asset purchases."
 
Today's US jobs data "fully justifies" the US Federal Reserve's decision to maintain its quantitative easing program of $85 billion per month in September, said Joseph Trevisani at New Jersey-based spreadbetting providers WorldWideMarkets to Reuters.
 
"Full bore quantitative easing will probably be with us through the first quarter and speculation for an increase may be no further than another weak payroll."
 
Speaking Monday to CNBC, "Every government program that is introduced as a temporary, emergency measure is always permanent," said Swiss investment manager, gold bull and now Asia-based author Marc Faber.
 
"The question is not tapering, [it's] at what point will they increase the asset purchases."
 
Alongside gold investment prices, world markets in equities, bonds and commodities also rose as the US Dollar fell to its lowest level vs. the Euro since November 2011.
 
Silver prices touched their best level in a month near $22.80 per ounce.
 
"On the gold investment side" however, said a note from Russia's VTB Capital this morning, "market participants lack conviction that gold could stage a decent performance going into 2014, [thanks to] expectations for gradually improving [interest rates] and completion of the Fed's accommodative policy stance.
 
"There is little rationale in inflation hedging or safe haven buying at the moment. No one expects the [gold] market to rally in a similar fashion to the past decade with annual gains in excess of 10%."
 
Gold investment through the SPDR Gold Trust – the world's largest exchange-traded gold fund (ticker: GLD) – shrank again yesterday, with a further 11 tonnes shed from the gold needed to back its shares.
 
That took the month-on-month change in GLD assets to its worst drop since early August, down 4.4% to a new four-and-a-half-year low beneath 872 tonnes.
 
Over in China – the world's No.2 gold consumer market, and likely to overtake India as No.1 in 2013 – "physical demand currently remains subdued," says a note from ANZ Bank in Sydney, Australia.
 
Because "increasing interest [will show] ahead of Chinese New Year," says ANZ, "it is unlikely to be evident before December."
 
Meantime in India, premiums on gold investment bars – over and above the benchmark London price – today held at record highs above $120 per ounce, according to Reuters, as the government's anti-import rules met increasing demand ahead of the key Diwali festival.
 
"Demand is picking up and supplies have dried up," the newswire quotes Bachhraj Bamalwa of the All India Gems & Jewellery Trade Federation.
 
Yet jewelers are struggling to make sales, counters the Economic Times of India from Kolkata, saying that many retailers are using incentives to push jewelry and investment pieces.
 
"This festive season you can a win a trip to Dubai or get a brand new Skoda with the jewellery you buy," says the paper.
 
Mehul Choksi of the giant Gitanjali chain says gold jewelry sales have fallen 30% compared with the same period in 2012.
 
"We do not see a sudden surge in demand coming this festive season," he says. "The mood is very bearish."
 
"Demand for bullion from the Middle East and Asia remains robust," says Credit Suisse's note today, "but we do not expect it to get close to the level of demand for physical bullion that the market experienced" in the first-half of 2013.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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