Gold Prices Settle Higher
Gold prices ended higher on Friday, boosted by a rally in both equities and other commodities as strong U.S. economic data increased the risk appetite of investors; while an increase in unemployment rate raised expectations about possible monetary easing from the fed in its next FOMC.
Nonetheless, gold posted its biggest weekly losses in preceding six weeks as policy statements from both the Federal Reserve and the European Central Bank (ECB) stopped short of offering any urgent and bold economic stimulating measures for the time being.
During the last week, encouraging comments from ECB’s President Mario Draghi unnerved edgy investors with equities, gold and other metals rallying; but the mood turned somber this week when ECB disappointed markets by not backing strong words with concrete actions. The metal lost 1.2% for the week after gaining 3% in last four days of the previous week in the wake of increasing expectations of monetary easing.
In the U.S.,even though the Fed acknowledged that U.S. economy was struggling under global economic slowdown, it only promised to keep the base rate at record low levels at least until 2014, staying silent over QE3.
As clueless bullion investors remained mainly in sidelines until Friday following tepid policy responses from central banks, investments in the yellow metal picked up later in the day when U.S. economic indicators showed unexpectedly stronger readings, prompting rally in equities and commodities. Gold has tended to move in tandem with other riskier assets this year.
Spot gold edged higher 0.9 percent to settle at $1,603.30 an ounce; and U.S. gold futures added $18.60 to close at $1,609.30.
A preliminary data provided by Reuters showed that trading volume was nearly 25 percent below its 30-day average.
The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.92% higher at $155.55.
The U.S. Department of Labor showed that non-farm payrolls increased by 163,000 for July while economists forecasted only 100,000 jobs creation for the period. Furthermore, a data provided by the Institute of Supply Management showed that nonmanufacturing activities’ index turned higher than expected. The reading stood at 52.6 even as economists polled by Reuters expected the reading at 52.1.
However, a marginal rise in the U.S. unemployment to 8.3%, up from June’s rate of 8.2% has once again raised hopes of possible quantitative easing from the fed.
Commenting over this matter, Peter Cardillo, chief market economist at Rockwell Global Capital said to Reuters that although improved job market is bring some relief to the market, it is by no means a signs of improvement in the economy. As a result, Cardillio believes that possibility of further monetary easing from the fed cannot be ruled out.
Echoing Cardillio thoughts, Nicolas Berge, a hedge fund trader at Geneva-based Absolute Capital Group said to Reuters, “Even though the nonfarm payrolls beat the estimates, the unemployment rate also rose, so the odds for a QE are all the same.”
“The increasing expectation of central-bank actions is likely to help gold break above its recent trading range,” added Berge.
In the past three months gold has traded in very tight range, hovering between $1,525 and $1,650 as very cautious approach from central banks drove away investors from bullion market; besides, sliding euro amid debt crisis also kept a lid on metal’s prices.
In some other precious metal markets, Silver climbed up 2.3 percent to settle at $27.73 an ounce. Platinum gained 1.7 percent to settle at $1,400.49 an ounce, while its sister metal palladium also leaped 2 percent to $576.25 an ounce.
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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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