Gold News

Gold "Lacks Buying Momentum" as US Sheds Two Million Jobs in 3 Months, Switzerland Joins Spain in Deflation

The Gold Price slipped in a tight range towards yesterday's two-week lows for Dollar investors on Friday, bouncing around $900 an ounce as the 3-day jump in world stock markets faded.

New data showed US unemployment rising yet again in March, with a revision to Jan.'s figure pushing total job losses so far in 2009 above two million.

It was the "risk friendly" Euro which fell hard on the data, however, losing ground to the Dollar alongside crude oil.

Here in London the FTSE100 share index ticked back to 4,100 – a level first reached in Dec. 1996 – after jumping more than 4.0% on Thursday, while the Gold Price in Sterling continued to fall sharply.

Dropping back to £605 an ounce, gold for UK investors stood more than 13% below Feb.'s all-time record high.

"As gold renewed its acquaintance with the $900 level," noted London dealers Mitsui this morning, "physical buying out of India emerged. Clearly, there is an appetite in these regions, but we suspect gold will have to travel deeper into the $800s before a strong buying momentum occurs."

For now, "Gold scrap flows have stagnated, but fresh investment flows have also slowed," says Manqoba Madinane for Standard Bank. "SPDR, the largest gold-denominated ETF, has seen no inflows since Thursday last week."

The spread above US Treasury yields demanded by corporate-bond investors has meantime narrowed, Madinane adds, and Standard Bank's proprietary Risk Aversion Index points to "reduced financial market systemic risk, which would bode ill for gold."

In late-Asian trade on Friday, the Japanese Yen – another key "safe haven" buy since the global financial crisis began in Aug. 2007 – slipped to ¥100 per Dollar and ¥135 per Euro, both five-month lows.

Japanese investors now Ready to Buy  Gold saw the price bounce to ¥2,920 per gram, virtually unchanged for the week.

"I'm not convinced that this risk appetite [in world stock markets] is going to be sustained," said Patrick Bennett, forex strategist for SocGen in Hong Kong, to the Financial Times earlier.

"[But] the Yen will probably continue to be weak because the fundamentals of the economy are just so horrid."

Japanese manufacturing activity shrank for the 13th month running in March. Industrial output has now shrunk by more than a third in the last year.

The Bureau for Labor Statistics said today that the United States lost a further 663,000 jobs in March, pushing the unemployment rate up to 8.5%.

Average earnings crept 0.2% higher from February, lagging the 0.5% rise in consumer prices.

Switzerland meantime became the second European economy to report an official drop into deflation, with consumer prices falling 0.4% on average in March from a year earlier.

Data released Monday showed annual inflation declining by 0.1% last month in Spain, where – after tripling in the 10 years to mid-2007 – Spanish real estate prices per square meter have plunged by 30% inside 18 months.

That's left as many as 1.2 million new houses and apartments.

"We agreed that it would be very dangerous if we were to let the debt spiral continue unhindered," said Jean-Claude Juncker, prime minister of Luxembourg and Eurozone finance minister, after the G20 summit ended in London on Thursday.

"Sometimes you have to accept deficits to boost demand, but it certainly can't be a long-term approach."

Failing to agree co-ordinated fiscal deficits, the group of 20 world-leading economies instead promised $1.1 trillion of monetary stimulus, to be injected via the International Monetary Fund (IMF) and partly funded by existing IMF Gold Sales.

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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