Gold prices surged this afternoon as traders scrambled for safety after a downbeat jobs report from the US government reinforced concerns about the pace of the economic recovery in the US. The Labor Department said this afternoon that the US economy created just 18,000 jobs in June, a much smaller gain than anticipated. Analysts expected to see a gain of over 100,000 jobs after yesterday’s report from Automated Data Processing (ADP) showed a gain of 157,000 in private sector employment, a sign that the job market is in better shape than thought. Meanwhile, the US dollar, a rival asset to gold, declined sharply after the non-farm payrolls data was released. The weaker than expected figures suggested that growth in employment is still sluggish, triggering speculation that the Federal Reserve may opt for another round of quantitative easing to spur the US economic recovery. Such a move by the Fed would weaken the US dollar as it would most likely lead to higher inflation. The decline in the American currency further lifted demand for gold. Gold traded at US$1,541/oz this afternoon. Silver moved in the same direction as gold, climbing to US$36.54/oz by mid afternoon, while platinum declined to US$1,740/oz. Lonmin (LON:LMI) and Randgold Resources (LON:RRS) shed 1.4 percent and 1 percent respectively, while fellow mining major Fresnillo (LON:FRES) was broadly flat in mid afternoon. In the FTSE 100, Petropavlovsk (LON:POG) and Hochschild Mining (LON:HOC) both added 1 percent. Small cap Pan African Resources (LON:PAF) was among the top performers in the sector, advancing 6 percent by midday.

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