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Gold Price Sinks Despite Tepid Jobs Report

Release Date: 
Friday, January 7, 2011

GOLD PRICE NEWS – The gold price pared its steep morning losses although still fell $6.38 to $1,365.08 per ounce Friday morning. The price of gold fell as low as $1,353 before bouncing on a disappointing jobs report from the U.S. Labor Department. Nonfarm payrolls rose by 103,000, well below the 150,000 estimated by a survey of Bloomberg economists.

Alongside the gold price, silver also climbed off its morning lows following the jobs data, trading at $28.70 per ounce – compared to a low of $28.32 before the release. The U.S. dollar gave up its gains, hovering near unchanged against most of America’s trading partners.

Across the Atlantic, yields on Spanish and Portuguese government bonds continue to climb. Spain’s 10-year yield jumped 16 basis points to 5.49%, while the yield on Portuguese debt of similar duration rose 27 basis points to 7.18%, its highest level since late November. Belgium also experienced weakness, as credit default swaps surged 16 basis points to a new record high of 235, according to CMA.

Despite the gold price’s weakness and dollar’s rally, many market strategists remain particularly bullish on the price of gold. Barclays Capital was the latest firm to issue its 2011 forecast for the price of gold, predicting an average gold price of $1,495 and a high of $1,620 per ounce. “A clouded macro environment against a backdrop of low interest rates, growing uncertainty surrounding currency debasement and medium-term inflation fears as well as geopolitical tensions continue to stoke investor’s appetite for a portfolio diversifier and a safe haven,” wrote Barcap’s precious metals analyst, Suki Cooper.

As for silver, Barclays predicted an average price of $29.10 in 2011, along with a high of $36.50 per ounce. Although silver mining supplies are substantial, according to the firm, investor interest is expected to remain strong. Moreover, Barclays noted that silver is likely to advance in concert with the rising price of gold in the coming year.
The weak employment data is likely to provide more ammunition for Chairman Bernanke to continue the Fed’s zero interest rate policy as well as its asset purchase program. With investors facing a negative real rate of return on their savings held in money market accounts, the allure of gold should continue to be strong.

Scott Carter is Chief Executive Officer of Goldline International, Inc. and host of the American Advisor radio  show.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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