Gold Prices Settle Higher But Posts Weekly Losses

Gold prices settled higher on Friday as unexpectedly strong U.S. non-farm payrolls   data did not rattle bullion investors, with experts saying that the job data is still not strong enough to persuade the Federal Reserve to cut short its latest round of quantitative easing.

Nevertheless, the metal has now posted second successive weekly loss, losing 0.4 percent for the week.

Gold futures for February delivery gained 0.22 percent or $3.70 to settle at $1,705.50 an ounce while spot gold edged up 0.2 percent to close at $1,702 an ounce.

A data provided by Reuters showed that trading volume in gold futures was 30 percent below its 30-day-moving-average.

Earlier on Friday, a data provided by the U.S. Labor Department showed that non-farm payrolls increased by unexpected 146,000 in November, comfortably above economists’ consensual estimate of 91,000 additions. The unemployment level also fell to 7.7 percent in November, from 7.9 percent in previous month.

While there were concerns initially that the FED might cut short its economic stimulating measures in the backdrop of improving labor market (the metal earlier during the day slumped to its one month low after the job data release as  investors liquidated inflation hedge bets fearing possible curtail of the QE3), traders and economists doubt over it.

They say that the  FED will persists with its bond buying program in order to ease the impact of spending cuts and tax increases, also referred to as fiscal cliff, from the next year—should congressional negotiations fail in reaching a consensus. However, some say, regardless the U.S. economy is off from fiscal cliff, the QE3 is likely to continue in 2013.

“It’s all about QE with these metals and I don’t think there is any end of that in 2013,” said Matthew Schilling, commodities broker at futures brokerage RJ O’Brien, while speaking to Reuters.

“ [ improvement in labor market]doesn’t remove the need for stimulus but might convince the Fed to opt for a smaller program,” commented  BK Asset Management managing director Kathy Lien.

Also, some other factors which needs to be looked at is that the Labor Department downwardly revised the final count of payrolls for both September and October and the drop in unemployment rate was mainly due to many Americans moving out of the job market or completely giving hope of finding any job. The University of Michigan’s consumer sentiment index, which was released on Friday, dropped to 74.5 in December from 82.7 in November, underpinning that the fact that people are still uncertain about the employment scenario.

The Federal Reserve is scheduled to held its next policy meeting next week; and it is expected that the central bank will announce fresh round of asset purchase program. Some economists, according to Reuters said that the Federal Reserve could increase the limit of monthly bond purchase to $45 billion. Back in September, the Federal Reserve had announced to buy bonds worth $ 40 billion, every month, unless the U.S. labor market showed significant improvement.

The strength in the U.S. dollar, though, continues to cap gains. Following strong job report data, the ICE dollar Index, a measure on U.S. unit’s performance against a basket of six major traded currencies, rose to 80.412 on Friday from 80.250 in late North American trading on Thursday, making dollar-dominated commodities expensive for traders dealing in currencies other than the greenback.

Holdings in Gold Backed ETFs Soars

A data provided by Reuters showed that holdings of gold-backed exchange traded funds, including world’s largest gold ETF- the SPDR Gold Trust (ETF) (NYSE: GLD), hit record high level of 76.133 million ounce as of Thursday Dec 6.

Moving to some other precious metal markets, silver futures inched up 0.05 percent to end at $ $33.131 an ounce. Platinum futures edged up 0.39 percent to $1,607.00 an ounce while palladium futures gained 0.14 percent to settle at $ 698.00 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.