Gold futures rise after strong U.S. jobs report

TradingPub Admin | December 7, 2012

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Gold prices were pushed higher on Friday, December 7, as market participants responded to news of a strong U.S. jobs report by pushing gold futures higher.

U.S. February gold futures trading on the Comex Division of the New York Mercantile Exchange were valued at $1,705.50 per ounce at 2:27 p.m. EST (19:27 GMT), according to Reuters. Preliminary data provided by the media outlet indicated that this contract had trading volume more than 30 percent less than its 30-day average. In addition, Spot gold crept 0.2 percent higher to reach $1,702 an ounce.

A Labor Department report released on Friday revealed that U.S. employers added 146,000 to payrolls in November, and the jobless rate dropped to 7.7 percent. MarketWatch reports that the job creation figure far exceeded the forecast of 80,000 new jobs predicted by economists. These market experts had predicted that the nation's unemployment rate would remain unchanged during the month.

Fluctuating Gold Prices 

Reuters reports the price of gold declined to its lowest level in one month early in the day, as the strong jobs report data caused investors to abandon their safe-haven buying. Later in the day, the price of the metal rose as market participants shifted their attention to adjustments to jobs figures from the Department of Labor indicating fewer jobs created in September and October.

Analysts said that the robust jobs data was not strong enough to reduce hopes that the Federal Reserve will engage in further quantitative easing (QE), according to the news source. "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.

"[Today's jobs data] doesn't remove the need for stimulus but might convince the Fed to opt for a smaller program," BK Asset Management managing director Kathy Lien stated, the media outlet reports.


The uncertainty in the existing economy was cited by various market experts as a factor that makes it difficult to predict where asset values will move in the near future, according to MarketWatch. One example of an asset that is unpredictable is the U.S. dollar, which rose relative to other currencies after markets responded to strong consumer confidence data.

The preliminary University of Michigan-Thomson Reuters consumer sentiment index dropped in December from the previous month, and the figure fell far short of the prediction made by economists taking part in a MarketWatch poll. After this data was released, the greenback gained compared to other currencies.

The U.S. dollar frequently has an inverse price relationship with commodities, as contracts for these raw materials are frequently denominated in the currency. If the price of the dollar increases, it makes it more expensive for buyers using foreign currencies to purchase commodities contracts based in the greenback.

"The ongoing [U.S.] fiscal cliff uncertainty and the possibility of more Federal Reserve asset purchases in the new year could undermine the dollar," Ben Traynor, chief economist at BullionVault stated, told MarketWatch. "But currency values are all relative, and the euro also faces headwinds."

It is reasonable to assume that the fiscal cliff could impact a wide range of assets, as it would cause more than $600 billion worth of U.S. federal tax increases and budget cuts to happen in 2013.

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