New York 08/07/2011 - Gold on the Comex division of the New York Mercantile Exchange gained 0.8 percent on Friday after a dismal US jobs report led to increased speculation that the Federal Reserve might resort to more quantitative easing to boost employment.
Gold futures for August delivery were recently up $11.60 at $1,542.20 per ounce in New York. Trade has ranged from $1,525 to $1,546.
US non-farm payrolls increased by only 18,000 last month, the weakest reading since September and well below expectations of a 97,000 gain. The national unemployment rate rose to a six-month high of 9.2 percent, up from 9.1 percent in May.
Additionally, the ratio between employment and the population declined to 58.2 percent, which is the lowest level ever recorded.
“This is pretty much a catastrophe,” Sterling Smith, an analyst with Country Hedging, said. “When you take out the birth/death adjustments and look at people actually working, this report is noticeably and demonstrably worse than what it appears to be from the headline number.”
The impact on gold prices has been multifaceted. First, the market has shifted into risk-off mode, which means that investors are moving wealth into safe-haven assets, such as gold.
This risk reduction mindset is evidenced by the fact that the Dow Jones Industrial Average, S&P 500 and Nasdaq each dropped more than one percent following the release of the report.
Additionally, light sweet crude (WTI) oil futures for August delivery on the Nymex are down $2.79 to $95.88 per barrel.
But, more specifically, the poor jobs report puts pressure on the US Fed to at least consider pumping more liquidity into the system via a third round of quantitative easing (QE3) or some other form of monetary loosening, Smith said.
As for the other precious metals, Comex silver for September delivery was down 6.9 cents at $36.475 per ounce. Trade has ranged from $36.010 to $36.895.
Platinum futures for October delivery on the Nymex were down $4.10 at $1,738.90 per ounce, while the September palladium contract was off $11.05 at $775.50.
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