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Momentum in Gold Bullion Unlikely Until New Year

December 7, 2012 - The spot price of gold dropped 0.2 percent to $1,701.60 per troy ounce, rebounding from a one-month low at $1,683.79 as U.S. gold futures for December delivery gained $1.40 to $1,703.20 per troy ounce.

The release of the U.S. job’s report instigated the move in bullion back above the $1,700 per troy ounce level, which came in with better-than-expected results. Non-farm payrolls increased by 146,000 jobs last month, according to statistics released by the Labor Department on Friday, with the unemployment rate dropping to 7.7 percent from 7.9 percent.

Standard Bank analyst Steve Barrow anticipated U.S. payroll data as the focus of the day for markets, but saw reasons why there would be muted reactions. He sees markets as clearly fixated by the fiscal cliff and it is doubtful that any data is going to have a significant impact until the cliff is sorted. He also said economic growth this quarter will be written off due to the impact of Hurricane Sandy.

Expectations are that the employment data out today will figure largely into the policy-making decisions of the Federal Reserve as the FOMC convenes early next week to decide whether to allow the Operation Twist bond-buying program to expire and whether to purchase new bonds with the initiation of QE4.

Ole Hansen, head of commodity strategy at Saxo Bank, said a weaker-than-expected number could have a gold positive impact on the Fed meeting.  However, it could also help force the hands of U.S. politicians as they can see that the economy is hurting from the lack of knowledge about where it stands on January 1.

Bullishness among gold traders has fallen to its lowest level in seven weeks according to a survey conducted by Bloomberg, which found 14 of 31 analysts expect the gold price to rise in the next week, accounting for the lowest proportion since October 19.

Jeffrey Sica, president of SICA Wealth Management in New Jersey, said we will get momentum again, but I don’t think it’s going to come until after the first of the year. He added that hedge funds that have underperformed and need to raise liquidity for redemptions are likely to sell their winners.


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Jonathan Monroe

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