Gold News

Gold Prices Spike & Drop Again on US Jobs Data, German Court "Kills" Eurozone Bond-Buying Plan, Silver Adds 3.8% on Week

GOLD PRICES made and lost a swift $14 jump per ounce Friday lunchtime in London, spiking to $1270 as new US data showed the economy adding fewer jobs than expected last month, the weakest January since 2010.
 
But the unemployment rate also fell, down to a half-decade low of 6.6%, even as the participation rate rose slightly from its worst level in 35 years.
 
Gold prices fell back to trade below $1260 per ounce, heading for a 1.3% weekly rise.
 
The price of wholesale silver bullion bars also made and lost a sudden spike on the US Non-Farm Payrolls report, going into Friday afternoon 3.8% up on the week.
 
"We view weak US economic data as the main threat to our bearish gold price outlook," said a note from German investment and London bullion bank Deutsche Bank in a note this morning.
 
"The recent improvement in the performance of gold will run out of steam, in our view, as US real yields and the US Dollar trade-weighted index move higher."
 
Immediately as Friday's US jobs data came out, the US Dollar Index fell 0.5% to a 1-week low.
 
But from this time last year, the Dollar was unchanged when measured against a basket of the United States' trading partners' currencies.
 
Ten-year US Treasury bond yields meantime ticked lower Friday morning. But from Feb. 2013 they stood 0.75 percentage points higher in nominal terms, and 1.2 points higher in real inflation-adjusted terms.
 
The gold price traded 25% below its level of 12 months ago, settling back to $1259 per ounce as US markets opened today.
 
"The longevity of a higher gold price," said a note from Swiss-based investment bank and London bullion market-maker UBS this morning, "ultimately depends on how market expectations for Fed tapering alters.
 
"If the weather effect [on Friday's US jobs data] is dismissed and market thinking about Fed tapering shifts, gold wins."
 
Chinese gold prices had earlier rise sharply on the wholesale Shanghai market's return from Lunar New Year holidays.
 
Premiums above London gold prices jumped to $11 per ounce from the $4 level seen when trading closed a week ago.
 
Asian stock markets also rose, cutting their losses for 2014 to date to 7.6% on the MSCI index.
 
Meantime in Karlsruhe, Germany's constitutional court failed to decide the legality of the European Central Bank's OMT bail-out program for weaker Eurozone states, instead referring the matter to the European Court of Justice.
 
Gold prices in the Euro currency peaked shortly after the ECB detailed its Outright Monetary Transactions plan, under which it could (but hasn't yet) buy unlimited quantities of Euro member nation debt, in September 2012.
 
Trading one-third lower from there on Friday, Euro gold prices cut the week's earlier 1.0% gains in half at €926 per ounce.
 
"The language is lascerating," says UK Telegraph columnist Ambrose Evans-Pritchard of the Karlsruhe court's comments.
 
Effectively "killing" the program, the court calls OMT "a violation of monetary financing," he adds. "Would create a political storm in Germany if ECB now tries to enact it. So there is no back-stop [for weaker Eurozone state finances]."

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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