Gold News

Gold Gives Back Week's Gains on US Jobs Data, But "Recovery Weak", "Wealth Insurance" Needed as Governments Re-Try Inflation

Gold Bullion prices fell hard for Euro and Dollar investors Friday
lunchtime in London, unwinding this week's 1.2% gains as world stock and
commodity markets jumped in response to new US jobs data.

August's Non-Farm Payrolls report surprised analysts with a headline
drop for August of 54,000 – half the losses expected – plus
stronger-than-forecast growth in private-sector hiring, up by 67,000.

"The private sector has net created a total of 622,000 jobs since last
November," noted Deutsche Bank analysts ahead of Friday's announcement.

"This is still fairly low compared to the 8.459 million private jobs lost during the previous two years."

Overall, the US unemployment rate crept up to 9.6%, with average earnings rising more slowly than expected from a year earlier.

"[Gold] is what I call wealth insurance," said Peter Hambro,
mining-magnate and chairman of London-listed Russia gold miner
Petropavlovsk Plc, to Bloomberg earlier this week.

"Everyone has health insurance, fire insurance...Gold is what is going
to protect you from the ravages of government...There is no way out for
these guys except to inflate away debt.

"I'm afraid that unless you have some real assets, you're going to be in trouble."

Elsewhere on Friday, new data showed Swiss consumer prices stayed flat
in August, while German and UK service-sector growth was slower than
expected.

Retail sales across the 16-nation Eurozone rose by 0.1% from July, the
official data agency said – just half the tepid rate of expansion
analysts forecast.

"The truth is that we have not had much of a recovery in the first
place," says New York professor and economics consultant Nouriel
Roubini, writing for Forbes magazine, "which might prevent the economy
from falling enough to display what many would label a double dip [in
the US] – although we are now assigning a 40% probability to such an
outcome."

Back in the Gold Bullion market, overnight trading in Asia was
"cautious" according to one dealer's note, but the US jobs data promised
"an exciting close to the week", especially with New York heading into
the long Labor Day weekend.

Over in Mumbai, "There are no [Gold Bullion] deals at these rates," said
a state-owned bank dealer to Reuters this morning. "There is an initial
resistance from traders to accept near-record prices."

Gold Prices for Indian consumers – the world's No.1 buyers, now entering
the strong post-harvest festival season – held just shy of recent
records at 19,200 Rupees per grams on Friday.

Ahead of the peak gold demand typically seen during Dhanteras in
November, "We are expecting festivals like Ganesh Chathurti and Navratri
may bring in sales," said another dealer.

A Reuters poll of 10 analysts and dealers says Indian gold imports (it
has next-to-no domestic Gold Mining output) will rise 5% to 504 tonnes
in full-year 2010.

Elsewhere in the commodities market, New York crude-oil futures jumped
through $75 per barrel on the US jobs data, with the broad hard-asset
indices reversing an earlier drop to show a 0.5% on the day.

"We are bullish on silver," says the latest technical note from
bullion-bank Scotia Mocatta, "looking for an eventual test of the 2008
high of $21.35 an ounce.

Silver traded wholesale in London today gave back 1.1% from a new
four-month high at $19.76. Supporting its bullish stance, says Scotia,
the Gold/Silver Ratio "broke lower" on Thursday through August's bottom,
meaning that one ounce of gold is worth fewer ounces of silver.

Moving down to 63.75, the gold/silver ratio looks bullish for Silver
Prices while it remains "below 64.90," says Scotia, "and we see April's
low of 62.66 as the next major [level]."

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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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