Stock Market Watch

Gold Prices Drop on Jobs Report

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Gold prices fell sharply in trading today, posting their biggest one-day loss in over a month. Gold fell following the release of better than expected nonfarm payrolls for the month of January.

According to figures released by the Labor Department earlier today, the U.S. economy added 243,000 jobs in the month of January, well above economists’ forecast. The unemployment rate also fell unexpectedly to 8.3% in January, the lowest level since February 2009. Economists were expecting unemployment rate to remain at 8.5% in January.


The continued improvement in the labor market has smashed hopes of extra stimulus from the Federal Reserve. Gold has risen in recent weeks on expectations that the Fed will continue with its loose monetary policy for a while. However, the improvement in labor market could result in the central bank raising interest rates sooner than anticipated and this makes gold unattractive.

Following four straight weekly gains, gold posted a small loss for this week as today’s sell-off wiped off the gains registered earlier this week. Despite the sharp decline today, gold is still up 11% this year.

Frank McGhee, Head Precious Metals Trader at Integrated Brokerage Services LLC, told Reuters that the jobs report has taken the market’s anticipation of additional quantitative easing off the table. McGhee said that with the bond yields and short-term interest rates jumping off the report, you could see more profit-taking in gold beyond just today and into the next several sessions.

Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott, told Reuters that better jobs news suggests that QE3 does not necessarily have to be locked and loaded at least at this point. Luschini said that the postponement of further monetary easing snuffed out at least a pullback in gold prices.

Spot gold today dropped 1.1% to $1,739.19 an ounce. Gold futures for delivery in April on the Comex division of the New York Mercantile Exchange fell $19 to settle at $1,740.30 an ounce.

Gold ETFs also fell sharply in trading today, with the SPDR Gold Trust (ETF) (NYSE: GLD) ending the day 1.98% lower at $167.66, the Market Vectors ETF Trust (NYSE: GDX) ending the day 1.79% lower at $56.44, and the iShares Gold Trust (ETF) (NYSE: IAU) ending the day 1.92% lower at $16.82.

Silver prices also fell sharply in trading today. At last check, spot silver was down 1.6% to $33.73 an ounce. Silver prices have risen sharply so far this year. Silver was the best performer among major precious metals last month, climbing over 20%. Silver is seeing strong physical demand, with American Eagle Silver coin sales totaling 6.1 million ounces in January, which is the second strongest month since the U.S. Mint introduced them back in 1986.

Silver ETFs also fell sharply in trading today. The iShares Silver Trust (ETF) (NYSE: SLV) ended the day 2.04% lower at $32.68, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) ended the day 4.01% lower at $60.51.

The ProShares UltraShort Silver (ETF) (NYSE: ZSL), which seeks daily investment results that correspond to twice the inverse of the daily performance of silver bullion as measured by the U.S. dollar fixing price for delivery in London, rose 4.16% to $10.27 in trading today.

In other precious metals, platinum and palladium also fell in trading today. At last check, spot platinum was down 0.1% to $1,625.74 an ounce, while spot palladium was down 0.2% to $703.93 an ounce.

Platinum prices have also performed well this year, up nearly 16%. Platinum prices have risen on concerns over the output of the metal from South Africa, which is a major producer.

 

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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