Gold Jumps 1% on Weak U.S. Jobs Data

By: Ben_Traynor

U.S. DOLLAR gold bullion prices responded to Friday's disappointing US non-farm jobs data by soaring 1% in less than 30 minutes to $1542 per ounce – the highest level for two weeks.

Stocks and commodities dipped while US Treasury bonds gained after news that the US economy only added 18,000 non-agricultural jobs in June, less than 20% of what many analysts predicted.

The number of long-term unemployed – those out of work for 27 weeks or more – fell to 42% of total unemployed, down from 46% in May.

Going into the weekend, gold prices were heading for a 3.5% gain on the week early Friday afternoon in London, having performed strongly in Thursday's New York trade.

"[However], gold appeared as somewhat of a laggard" behind other precious metals on Thursday, says Marc Ground, commodities strategist at Standard Bank.

"[This hints] that investors are beginning to feel that gold is a bit overbought at these levels," 
gold bullion "remains strong on other currencies, notably in Euro terms," says Swiss precious metals refiner MKS.

The gold price in Euros hit €34,698 per kilogram (€1079 per ounce) Friday lunchtime London time – up 5.4% for the week.

Silver prices meantime rose to $36.60 – an 8% gain on the week.

On Thursday meantime, European Central Bank president Jean-Claude Trichet repeated his desire to see "no credit event, no selective default, no default" in the Eurozone. 

Speaking at a press conference after the ECB voted to raise its interest rate to 1.5%, Trichet also said the ECB will continue to monitor "upside risks to price stability.

"It is essential recent price developments do not give rise to broad based inflation pressures over the medium term."

The ECB also announced Thursday that it has suspended its application of the "minimum credit rating threshold" for Portuguese government debt. This means it will still accept Portuguese bonds as collateral, even though ratings agency Moody's downgraded them to junk status – below investment grade – on Tuesday.

"The ECB would rather have [Eurozone] taxpayers carry the risk [of default]," reckons Jan Randolph, head of sovereign risk at consultants IHS Global Insight, adding that it fears becoming a permanent "bad bank" where junk assets are held to prevent a crisis in the financial system.

In Basel meantime the latest annual report from the Bank for International Settlements – known as the central banks' bank – shows a 635 tonne reduction in gold bullion deposits from central banks, the FT reports.

The withdrawal of gold bullion – the largest in ten years – suggests that central banks are unhappy with the interest they get for lending their gold, reports the FT. The Gold Lease rate on Thursday was 0.1%.

"There may have been a switch back to lending to the private sector," said Philip Klapwijk, executive chairman of leading precious metals consultancy GFMS.

Over in India – the world's largest gold bullion market – state-owned bullion dealer MMTC expects its gold imports for the current fiscal year to reach 350 tonnes, up 40% from the previous year, according to a report from MSN India. 

Silver bullion imports, meanwhile, are expected to grow 36% to 1200 tonnes.

By Ben Traynor
BullionVault.com

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

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