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Gold to 2-Month Low on U.S. Jobs Report

November 02, 2012

The release of today’s U.S. nonfarm payrolls data indicates an increase in jobs by 171,000 in the month of October, a significant level above the anticipated 125,000, though the jobless rate remains at 7.9 percent.

The news hit markets immediately with a rebound in the strength of the U.S. dollar, early gains in stocks, which were later erased, and a drop in the precious metals.

The jobs report has been long anticipated after the Federal Reserve tied the current round of quantitative easing to the health of the labor market. Because no long-term, open-ended stimulus policy has been announced by the Fed, particularly not one contingent in scope on the health of the job market, investors looked to this jobless report for an indication as to the direction of markets.

Gold traded between $1,716 at its high and touched lows at $1,684 per troy ounce, the price of gold breaking though the psychologically important $1,700 per troy ounce level that had been providing solid support for the metal all week amidst market pressure downward.

MIG Bank analyst Bijoy Kar said the strong resistance between $1,791 and $1,803, coupled with overbought conditions, favors a corrective phase. Kar expects strong support at $1,647 to hold as the metal trades in a secular uptrend with stronger support at $1,523.

Since the inception of quantitative easing, gold has lack upward drivers as the market experiences an atypical lack of investor demand from Chinese and Indian gold markets, traditionally the largest markets for gold in the world. Despite going into the festival seasons, in which gold is exchanged as a gift, several factors have contributed to a subdued gold market, including government regulation and taxation.

U.S. Mint sales depict a particularly mixed precious metals market with sales of U.S. Mint Gold and Silver Eagles Coins weaker than the previous month but higher than sales figures from October of last year. In many categories, only one or two months of 2012 beat October’s sales figures, despite a cautious investor landscape.

As precious metal continue to price in the style and format of the new quantitative easing, absent demand in foreign markets, the mixed signals of the market will likely contribute to the cautious sentiment.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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