Gold Price Jumps to $1240 on Weak US Non-Farm Jobs Data, But Jobless Rate Sinks Towards Fed's Rate-Rising Limit
Friday, 1/10/2014 13:00
GOLD PRICES leapt $16 in 10 minutes on the release of Friday's US non-farm payrolls report.
Hitting $1244 after the new data showed only 74,000 net jobs being added by the US economy last month.
That was well below analyst forecasts of 196,000.
The gold price then slipped back in busy trade to stand 0.5% higher for the week at $1239.
Silver prices rose back through $20 per ounce for the first time since Tuesday, reversing the week's earlier 4.1% drop.
"Slower-than-expected [US Fed] tapering, weaker equity markets and a softer dollar could help to revive gold in the short term," says a new report from London market-maker Barclays Capital.
But cutting its average 2014 gold price forecast to $1205 per ounce, "a more structural shift in market dynamics, including signs of inflation...or greater-than-expected demand from China, particularly from the official sector...would be required to turn the tide for gold," it says, predicting a trading range between $1075 and $1375.
"We expect gold prices to test fresh 2010 lows."
Ahead of
Friday's US jobs data, Bank of America Merrill Lynch cut its average 2014 forecast for the gold price by 11% to $1150 per ounce on Thursday.
Noting continued sales from exchange-traded gold trust funds, "If investors stopped selling gold," says strategist Michael Widmer, "prices could stabilize around $1200.
"[But] this is not our base case...Our model suggests $1000."
The monthly US jobs report has proven a key point for gold price volatility since the Federal Reserve said in late 2012 that it won't consider raising short-term interest rates until unemployment falls to 6.5% and below.
Thanks to a sharp drop in the working-age participation rate, today's US jobs data put the jobless rate at 6.7%, down from 7.0% in Nov. 2013 and its lowest in 5 years.
US unemployment could fall to 6.5% by mid-year reckons Aneta Markowska, Societe Generale's chief US economist, speaking yesterday to CNBC.
"Abnormally low interest rates," said Nic Brown of French investment bank and London bullion dealer Natixis to Mineweb this week, "have been of huge support to the gold and other precious metal prices over recent years."
US Fed tapering, plus the threat of rising short-term rates "are an important negative factor in the market in the months and years going forward," he believes.
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