Gold News

Gold closes London below $658 on US jobs data

Spot gold prices stayed below key technical levels at the London close on Thursday, failing to spike on news of Israeli air-strikes in Gaza.

The day's sharp $6 drop came on new that claims for US jobless benefits fell more than 5% in the week to last Friday.

At 293,000, the number was also 7% down on Wall Street forecasts – and with fears of a US slowdown delayed for another week, hopes of a cut in US interest rates were also put on hold.

That spurred the Dollar into pushing the Euro down half-a-cent to a one-week low of $1.3481.

As US stock futures dropped back from Wednesday's fresh record high in the Dow, gold bullion added to Wednesday's $11 loss to sink below $658 – the cheapest Dollar price of gold in 7 weeks.

That level represented key support on the 100-day moving average according to this morning's technical note from Standard Bank. (Why has gold sold off hard in the last fortnight? Find out more here...)

Against the Euro gold prices also fell – even as the single currency dropped – losing 0.6% to €488 per ounce, a fresh two-month low.

Sterling was also hurt by the Dollar's ongoing rally in the currency markets, but the Pound price of gold fell faster – down 0.8% inside 45 minutes to £333 per ounce.

Despite the better-than-expected jobs data, "inflation isn't strong enough to offset the stronger Dollar," reckons Nick Moore, an analyst at ABN Amro.

"The whole commodity complex is weak."

But while base metal prices continued to struggle in London, Brent crude oil rose towards $69, even as the Opec oil cartel said it would be happy with oil price down between $60 to $65 per barrel.

Treasury bonds fell to a one-month low on the US jobs data.

"In the sense that the labor market is strong, it reduces the likelihood of a near-term Fed easing that had been priced into the market," said Alex Li, a strategist at Credit Suisse in New York.

"Yields have been higher across the curve, especially the very front end."

At 4.74% however, the returns offered by 10-year US bonds still leave the "yield curve" inverted – a classic sign, according to economic history, of a recession ahead.

John Williams' Shadow Stats – an alternative crunching of US government data – puts consumer price inflation up above 6% today.

And negative bond yields usually drive investors to seek safety in gold. (Find out why here...)

"It's not the absolute price gold reaches," explained George Milling-Stanley, a spokesman for the World Gold Council, yesterday.

"It's how it gets there."

The WGC reported that average gold prices rose $100 per ounce during the last 3 months.

Jewelry demand rose 38% in Dollar terms. Total demand for physical gold bullion rose by more than one-fifth over the same period last year.

The long-term bull market rolls on, in other words. And behind the noise and fury of "hot money" fleeing the market, the central bank of Spain has found eager buyers for 80 tonnes of its gold reserves during the last two month.

The Banco de Espana's foreign reserves have now fallen by two-thirds. Greece and Portugal have seen a similar drop for the same reasons. It needs the money to cover a gaping hole in its balance of trade. (Get a full report on the Euro & its structural weaknesses here...)

If you'd like to take advantage of the current pullback, click through to www.BullionVault.com for easy, low-cost access to professional gold prices now...

Adrian Ash

Adrian Ash, BullionVault Gold News

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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