Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter


Gold Price Jumps on U.S. Economic Weakness

Commodities / Gold and Silver 2011 Jun 06, 2011 - 03:02 PM GMT

By: Ben_Traynor


U.S. DOLLAR gold prices hit $1548 per ounce in Asian trading Monday – a near-one-month high, and a 1.8% gain on last week's low – before slipping back when London opened, while stock and commodity markets continued to drop after Friday's disappointing US jobs data.

Silver prices hovered in a 1% range around $36.74 per ounce.

"Speculations of a generous third quantitative easing (QE3) package will grow" if the negative tone of US economic news continues, reckons Swiss precious metals firm MKS.

"Expectations in the market suggest that gold prices will benefit in the short term by the belief that slowing growth in the US will prompt the Federal Reserve to maintain favorable monetary conditions." 

The US economy added just 54,000 jobs in May, according to non-farm payroll data published Friday by the Bureau of Labor statistics, compared to analysts' forecasts that ranged from 150,000 to 190,000.

"This is gold-friendly data," says Credit Agricole analyst Robin Bhar.

"In the worst case scenario, we could have a double-dip in the US economy and possibly deflation, which would also help gold."

The US economy "is not able to stand on its own two feet...without fiscal and monetary stimulus and heavy government support," Hans Goetti, chief investment officer Asia at Finaport Investment Intelligence, told Bloomberg Television on Monday.

The likelihood of QE3 "is growing" reckons Cliff Waldman, economist at the Manufacturers Alliance/MAPI.

"Looking at all the data [the Fed is] going to determine we need all the help we can get." 

"We don't see a QE3," countered Bill Gross, head of PIMCO, the world's largest bond fund, in a radio interview on Friday. "There has been too much discussion and dissent within the Fed to permit that type of program again...

"[But] What we do see is [the Fed] will simply speak to a Fed funds rate that persists for an extended period of time that in effect caps interest rates in the process."

Gross added that if the Fed funds rate were to remain at 0.25% for three or four years, then "that allows the three or the four year Treasury to sink close to 25 basis points, and that does effectively the same job as quantitative easing."

Over in Europe meantime, Euro gold prices rose to €34,035 per kilogram (€1058 per ounce) Monday morning – a 0.5% gain on Friday's close, but still 1.3% down on where they started last week.

The Euro meantime touched a one-month high of $1.46 against the US Dollar – a 2.3% gain since last Wednesday – before slipping back. 

"The turning point was Greece, and we can suggest Greece is out of the way for the short term," reckons Kurt Magnus, Sydney-based executive director of currency sales at Nomura Holdings, referring to news that the EU and the International Monetary Fund have officially agreed to pay the next installment of last year's €110 billion bailout.

German newspaper Der Spiegel reported Monday that a new aid package for Greece, currently under discussion, could exceed €100 billion. The Greek press on Friday reported a figure of €85 billion, while the rumored figure last Tuesday was €60 billion.

On the gold futures and options market, meantime, the net bullish position among non-industry, so-called speculative traders rose 5% in the week ending 31 May. 

"While the jump in speculative length seems big, the market for gold still does not look overextended," says Walter de Wet, commodity strategist at Standard Bank in London, noting that, as a percentage of open interest, the two-year average position of net speculative longs is well within its range over the period.

Pointing to US economic data, "lower demand and slower growth favors accommodative monetary policy," Standard Bank noted late last week. 

"This benefits gold."

By Ben Traynor

Gold price chart, no delay   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules