Weak US Jobs Data See Gold Bullion Halve the Week's 1.8% Drop as Stocks Fall Again

[The Machine]

 

 

GOLD BULLION prices spiked Friday lunchtime in London, recovering half of the week's 1.8% loss to trade at $1295 per ounce after US jobs data came in much weaker for July than analysts forecast.

 

"Another gain in employment [would] really focus the Fed's response," Reuters early quoted one London analyst, pointing to expectations of a rate-hike from 0% sooner in 2015 than markets currently forecast.

 

But after Wednesday's private-sector ADP release also missed the Street's consensus, Friday's official Non-Farm Payrolls report said the US added 209,000 net jobs last month – 30% below June's reading and the lowest addition since March.

 

That figure also put the US jobless rate back up at 6.2% from June's near 6-year low.

 

Western stockmarkets fell for the second day running, pulling London's FTSE100 down to a 1.9% loss for the week.

 

The US Dollar meantime fell half-a-cent from the week's earlier 2014 highs vs. the Euro, while longer-term US bond yields also fell.

 

"We see no reason as to why gold would collapse to sub-$1000 as many predict," writes Kieron Hodgson at UK stockbrokers Charles Stanley.

 

Although neutral right now, "The nearer bullion gets to the low-end of its well-established trading range of $1250 to $1350," says the brokers' mining analyst, "I would be inclined to increase exposure, especially in the absence of any resolution to the various geopolitical concerns."

 

But "lower stocks, Israel-Hamas, and geopolitical tensions in Russia-Ukraine are [being] ignored by precious metals," Barrons quotes analyst George Gero at investment bank RBC Capital, pointing to expectations for higher US interest rates.

 

"Gold seems," agrees Walter de Wet, senior analyst at Standard Bank's commodities division, "to have largely discounted the political turmoil around Russia and Israel.

 

"From a tactical perspective, we maintain that the bias for gold is to the downside," de Wet adds. Because with the gold price again below its 200-day moving average,"technically it looks weak."

 

Price drops in gold bullion may be capped, however, as "demand from Asia is improving and [although] price-sensitive...this should support gold on approach of $1250."

 

Short term, one London gold broker wrote Friday morning, "Sentiment is overwhelmingly bearish down here. The upside seems limited for the time being."

 

Gold bullion coin sales by the US Mint so far in 2014 total less than half the same period last year, according to data published on its site.

 

"July is a typically slower month for bullion coins," notes CoinNews, "but demand was exceptionally weak...the second lowest this year."

 

Silver bullion today tracked gold prices, halving the week's previous 1.8% drop to approach Friday's close at $20.50 per ounce – the lowest weekly finish since mid-June.