Gold News

Gold Prices Drop Weekly Gain as US Jobless Rate Falls, Fed's 0% Policy "Playing with Fire"

GOLD PRICES erased this week's gains in London trade Thursday morning before spiking lower but recovering after much stronger than expected US jobs data.
 
Non-Farm Payrolls rose by 288,000 in June, the BLS said – the strongest net addition since mid-2010 – pushing the jobless rate down to 6.1%.
 
Crude oil prices fell for the 6th session running as the Dollar pushed the Euro currency 0.5 cents lower on the FX market.
 
Silver tracked gold prices but regained $21 per ounce to stand higher from last Friday's finish.
 
Ahead of the United States' long Fourth of July weekend, the Dow Jones stock index broke above 17,000 for the first time.
 
"The Fed should take notice," Bloomberg quotes $20 billion bond-fund manager Richard Schlanger at Boston's Pioneer Investments
 
"There's underlying improvement in employment and it's not quite as dire as [Fed chair] Yellen thinks it is."
 
Speaking at the IMF in Washington on financial stability ahead of today's US jobs data, "I do see pockets of increased risk-taking across the financial system," the Federal Reserve chief said.
 
"[But] I do not presently see a need for monetary policy to deviate," Yellen went on, "from a primary focus on attaining price stability and maximum employment."
 
"This Fed is playing with fire," writes former Citigroup and now Gluskin Sheff economist David Rosenberg, " erring on the side of uber-accommodation far too long."
 
Today's US jobs data led several big-name economic forecasters to bring forward their expected date for the Fed to raise interest rates from 0%.
 
J.P.Morgan economist Michael Feroli now sees fall 2015 more likely than winter next year, with a spring rise "plausible".
 
"The wave of bullishness in global equities markets," says bullion market-maker HSBC's analyst James Steel, "is not undermining gold prices this go around.
 
"This may denote underlying strength in the bullion markets. We suspect there is more to the gold rally than geopolitical inspired buying" due to the Ukraine, Iraq or Syrian crises, Steel tells Platts.
 
Russia's No.1 gold miner, Polyus Gold International (LON:POLG), meantime said today it has begun a "price protection programme" – hedging one-third of its million-ounce output for the next 3 years for fear of falling gold prices.
 
The program "ensures a minimum weighted average price of $1382 per ounce," says Polyus, "provided the gold price does not fall below $950."
 
“When you over supply the gold market," counters Africa-based miner Randgold (NASDAQ:GOLD) CEO Mark Bristow, "the gold price goes down.
 
"We saw that in Nineties with the gold hedging and we had multiple extra ounces being supplied into the gold industry. As soon as we tightened it up in 2001, the gold price just shot up."

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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