Gold News

Gold blinks on US jobs data; "going higher, you can count on that"

Gold Prices sank and then bounced to recover their narrowest range for three weeks in early New York trade on Friday, heading for a lower weekly close but more than $10 per ounce above Thursday's PM Fix.

Commodity, currency and equity traders had all been watching and waiting for the key monthly US jobs report at 08:30 EST. When it showed that US payrolls outside the farming sector grew by 110,000 last month vs. 100,000 expected, the Gold Market dropped sharply, losing $6 inside 30 minutes to bounce off $730 per ounce as hopes for lower US interest rates in the very short-term were dashed yet again.

"It's less likely the economy is going into recession and less likely the Fed will have to save us," said one bond-fund manager to Bloomberg, forgetting that yesterday's Factory Orders data for Aug. showed a 3.3% decline for the month.

The Euro also sank on Friday's jobs news, spiking nearly one cent lower to hit a two-week low beneath $1.4050. That kept the Gold Price in Euros above €520 per ounce. Gold then rallied against all currencies right back to the level it had traded at throughout the Asian and early London sessions.

Earlier in the morning, ABN Amro – the Dutch investment bank – followed Citigroup and Deutsche Bank in upgrading its forecasts for the Gold Price, alongside copper, coal and iron ore. The price of lead surged to a new record high at the London Metal Exchange, while copper prices continued to rise for the fourth week running following a mine-strike in Peru.

Global wheat prices, in contrast held flat on the futures market, heading for their first weekly decline since July. They had more than doubled since April on poor harvests in Europe and Australia. Domestic prices in South Africa, the continent's third-biggest wheat producer, fell as the Rand rose on the currency markets towards a new 12-month highs versus the US Dollar.

At the Tocom exchange in Tokyo, gold futures for delivery in Aug. '08 ended the session 1.2% higher, equal to $742.67 per ounce. Platinum futures rose for the third day running, despite Mazda – the Japanese auto giant – announcing on Monday that it has developed a catalyst for cars that could cut platinum use by up to 90%.

Catalysts remain the No.1 use of all platinum-group metals, according to a June report from the CPM consultancy. Auto-industry demand for platinum doubled in the 10 years to 2006 to reach 125 tonnes. Jewelry demand, meantime, slipped by more than 7% last year to only 19 tonnes.

Back in today's markets, crude oil traded sideways after a surprise increase in US stockpiles knocked it back from all-time highs above $83 per barrel on Wednesday.

"Prices usually collapse around the end of October, start of November," according to Johannes Benigni at PVM Oil Associates in Vienna. "There's been no fundamental reason driving prices higher. It's been higher because of funds jumping into it. I see more downside potential."

On the economic front, meantime, UK finance minister Alistair Darling is now expected to cut his growth forecast for 2008 from 3.0% to 2.5% after telling the Financial Times that "there will undoubtedly be an effect" on the British economy from the ongoing turmoil in world credit markets.

Darling said that the Federal Reserve's 0.5% cut in Dollar interest rates would help "counterbalance" the impact on the United States, but he refused to comment on the Bank of England's decision to keep British interest rates on hold on Thursday.

Today saw the start of a 6-day strike over wages by workers in the government-owned Royal Mail postal service, while a new report said this morning that the average British home now costs a record multiple of the average first-time buyer's income – twice what it was 10 years ago at five times salary.

As a percentage of income, monthly mortgage costs have also doubled since 1997 to reach more than 32% on average.

"The standard of living of most people in the West is not going to get better relative to mean growth over the course of the last 20 years," said Philip Manduca, managing partner of the $500-million Titanium Capital fund in London, to a Bloomberg News anchor in an interview on Thursday.

"So there are going to be lots of calls for Monetary Ease and wage improvements. [But] the problem here is you just haven't got the growth, you haven't got the margins, you haven't got the profits going to bottom lines to create wage improvements and bonuses."

What to do? "Gold's going higher, you can count on that," reckons Manduca.

Citing strong gold demand amongst Asian central banks, wealth funds and consumers – and "Asia's where the growth is" – Manduca believes that gold "is still cheap, in fact, relative both to its fundamentals and its historical price in real terms."

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Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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