FS: US GOLD OPEN – Comex gold rallies after big jobs miss
Orlando, Florida 05/04/2013 – Gold futures bounced after the release of a US nonfarm payrolls report that showed only tepid job growth in March and highlighted the fragility of the economic recovery.
Gold for June delivery on the Comex division of the New York Mercantile Exchange was last up $13.10 at $1,565.50 an ounce, while hitting a session high of $1,576.00 seconds after the US data was released.
Nonfarm payrolls added just 88,000 jobs last month, missing the 198,000 forecast by a country mile; however, the prior two months were revised upward by a combined 61,000 jobs to 148,000 in January and 268,000 in February.
The unemployment rate actually fell to 7.6 percent from 7.7 percent the prior month as labour force participation declined by 496,000, or 0.2 percentage points, to 63.3 percent, which marks the lowest level since May 1979.
“This is a bad number – one that will be a shock to the markets. Things are not as good as we thought they were just a week ago,” a US-based metals trader said.
“After yesterday’s weak showing, it’s safe to say that equities will pull-back dramatically – they’ve significantly outperformed fundamentals for months and are due for a correction,” the trader said.
“It will be more interesting to see how gold behaves. We would guess that the market will fall back into it’s old rhythms and will hold these gains throughout the session. But, if for some reason, gold shrugs off this report and closes below $1,555, the pre-jobs report level, then that would add credence to those who argue that this bull market is over,” she added.
Gold prices often rise after disappointing jobs numbers because the US Federal Reserve has said that there must be a significant improvement in the labour market before it pulls the plug on quantitative easing (QE). During the decade-long bull run, one of gold’s biggest allies has been historically low central bank interest rates and non-traditional central bank stimulus.
“If gold can’t rally after the worst jobs report in two years, it will never rally,” the trader quipped.
In the wider-markets, the euro rebounded following the labour report and was last up two thirds of a cent at 1.2994 against the dollar, while Germany’s DAX and France’s CAC-40 were down 2.08 percent and 2.09 percent respectively. US stock markets also opened significantly lower.
As for the more industrial commodities, light sweet crude (WTI) oil futures were down 73 cents at $92.53 per barrel and the most-actively traded Comex copper contract was at $3.3325 per pound, off 1.3 cents.
In other gold supportive news, the Bank of Japan yesterday announced plans to pump $1.4 trillion into the economy over two years in what promises to be a historically significant easing programme.
“Because the monetary policy pursued by most central banks around the globe remains expansionary in any case and, in the case of Japan, is set to become significantly more expansionary, gold should in our opinion remain in demand as a store of value in the medium to long term,” Commerzbank AG.
Elsewhere, the UK’s BoE and the ECB both left interest rates unchanged at 0.5 percent and 0.75 percent respectively and decided not to extend their monetary easing programmes. But ECB president Mario Draghi said that the decision to keep rates at that level was not unanimous after “extensive discussions”, with some market observers suggesting a rate cut is in the offing – perhaps before the end of the first half of the year, to combat further contraction in the eurozone economy.
Meanwhile, physical gold demand is likely to pick-up given the recent price decline, HSBC analyst James Steel said.
“Gold demand was muted from China as the markets were closed in celebration of Qingming Festival,” Steel said. “The re-open of the Chinese markets today may provide near-term support for gold and a pick-up in physical bullion demand may help stem further price losses.”
As for the the other precious metals, Comex silver for May delivery was up 30.8 cents at $27.075 an ounce. Trade has ranged from $26.730 to $27.200. Platinum for July delivery on the Nymex was last up $14.00 at $1,531.80 an ounce and the June palladium contract was $718.05 an ounce, up $7.40.
