Gold News

Spot Gold Drops 1.4% from New Record High as Dollar Rallies on US Jobs Data, Raises "Spectre" of Rate Hikes

Spot Gold slumped 1.4% lunchtime Friday in London, falling back from its highest-ever monthly close as the Dollar jumped on news of stronger-than-expected US jobs hiring in March.

"[Although] some way off...the great risk to the metals remains the spectre of positive real interest rates," says one London dealer in a note.

The US economy has added 837,000 jobs in the last 6 months, but employment remains 2.4 million lower than when the Federal Reserve moved to zero rates and quantitative easing at the start of 2009.

"What we have to see now is how gold fares in an environment of rising interest rates, where holding a non-yielding asset goes against you," reckons RBS commodity strategist Nick Moore, speaking to Reuters.

The price of Spot Gold for immediate delivery ended March at a new monthly-close record of $1439 per ounce at the London Fix.

Silver Prices also ended March with an all-time record high monthly close of $37.87 per ounce – more than $2 above the previous month-end high of Feb. 1980.

"From a big picture perspective, there is no sign that the current trend [in Silver Prices] is about to reverse," says Russell Browne, strategist at bullion-bank Scotia Mocatta.

Gold closed March higher "for the second month in a row," he notes, with "January's correction to $1308 [now] viewed as a necessary retracement before making the next leg higher through December's $1430."

Thursday saw the Spot Gold Price in Dollars complete its 9th quarterly gain in succession – the longest run since 1979 according to Bloomberg data.

Priced in the Euro, says BullionVault analysis, gold last night completed its 24th consecutive quarter of year-on-year gains, an unbroken run starting in June 2005.

Gold Investment prices to private citizens in Japan rose today to a new 28-year high, reports Reuters, hitting ¥4065 per gram when the sales tax of 5% is included according to Tanaka Kikinzoku Kogyo, Japan's largest gold retailer.

Gold Bullion stored to back the world's largest single gold trust fund, in contrast, actually shrank between Jan. and April, posting its largest quarterly decline since launching in Nov. 2004.

Worries over the Libyan conflict, plus fresh Eurozone debt concerns, "encouraged gold safe-haven buying" on the last day of the month, says Mark Pervan at ANZ Bank.

The BBC said today that 7 civilians were killed in a Nato-coalition airstrike on pro-Gaddafi forces.

After the government resigned last week, Portuguese president Anibal Cavaco Silva today called an election for June 5th, saying that "the next government faces an unprecedented economic and financial crisis."

Ireland's call for its banks to raise another €24 billion – to be funded out of state aid and EU bail-outs – "is the scale of the legacy that we have now inherited," said Dublin's new prime minister Enda Kenny.

"I can only hope this is the final scale of it."

Shares in Bank of Ireland jumped when they resumed trading after a temporary suspension amid the stress test results. Rising to a 1-week high, however, BoI remained 98% below its peak of Feb. 2007.

The European Central Bank meantime "decided to suspend" credit-rating requirements on Irish government bonds when used by commercial banks to raise credit from the Frankfurt lender.

It's now 12 months since the ECB made a U-turn on such "special treatment", allowing Greek government bonds to be used as collateral despite sliding below the benchmark credit rating requirement.

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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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