July 8, 2011

Higher Gold Prices? Disappointing U.S. Jobs Report Pushes Metal Up

Rise in U.S. unemployment to 9.2% sends precious metals toward record territory

Investors spooked by the debt crises in Greece and Portugal, who had driven gold back over $1,530 per ounce on Thursday, gave back just a bit in tracking euro losses on Friday. Prices of the precious metal were down Friday morning, with spot gold bid at $1,527.66 per ounce in midday European trading against late Thursday's price of $1,531.85 in New York. U.S. gold futures for August delivery dropped back $2.30 to $1,528.30. Spot gold had reached $1,534.20 per ounce, its highest since June 23, the day before.

Reuters quoted  Mitsui & Co Precious Metals analyst David Jollie as saying, "If you look at the euro zone situation, that is still there, and a lot of European investors would still like more diversity than just holding euros. That can be a risk aversion thing rather than a view that gold will appreciate in price."

However, it looks as if gold may be headed higher. Part of its price drop in overseas early trading Friday was in anticipation of a strong jobs report from the U.S., which was expected to add 90,000 jobs. HSBC analyst James Steel said in a note before the report came out, "Data indicating economic growth are generally bearish for gold, as it also encourages higher interest rates."

But that was not the case for the U.S. economy. The Friday morning jobs report for June from the Labor Dept.’s Bureau of Labor Statistics indicated that the U.S. is far from resuming economic growth, at least as measured by jobs. Only 18,000 jobs were added during June, BLS reported, and the unemployment rate edged up to 9.2% from 9.1%. BLS noted that since March, “the number of unemployed persons has increased by 545,000, and the unemployment rate has risen by 0.4 percentage point. The labor force, at 153.4 million, changed little over the month.” Also, April and May payrolls were revised downward by 44,000 jobs, showing still more weakness in job creation.

Silver had given back a bit in early trading as well; it was bid at $36.20 per ounce against $36.41. Spot platinum was bid at $1,745.50 per ounce against $1,739.85, while spot palladium was at $780.97 per ounce against $781.55. Palladium had been gaining against platinum, but disruptions in auto manufacturing put buyers off the metal.

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