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Gold Prices Holds $1,350 After Jobs Report

Release Date: 
Friday, February 4, 2011

GOLD PRICE NEWS - The gold price fluctuated following the release of the monthly jobs report, initially rallying $7.00 on the news and then giving back half of those gains. The price of gold traded at $1,351 per ounce - off $3.00 versus yesterday’s close - after news that 36,000 nonfarm payroll jobs were created, a figure substantially less than the 150,000 expected by economists. On the bright side, the jobless rate fell to 9.0%, its lowest level since April of 2009. Bad weather was blamed for the weak job creation. Gold prices were higher by 1% on the week heading into the final trading day.

Providing a further tailwind for the gold price and gold equities were dovish comments from the heads of the world's two largest central banks - European Central Bank (ECB) President Jean-Claude Trichet and Federal Reserve Chairman Ben Bernanke. At the ECB's monthly meeting on monetary policy, Trichet disappointed inflation hawks by giving no indication of tighter monetary policy on the horizon. Trichet's comments came in spite of rising inflation expectations in Europe, following January euro zone inflation that came in at 2.4%, well north of the ECB's target of just below 2.0%.

Bernanke presented his dovish stance in a speech at the National Press Club, noting that the U.S. employment outlook is expected to remain challenging for several more years. As for inflation, the Fed Chairman asserted that although prices of some "highly visible" goods - including food and energy - have significantly increased, "overall inflation remains quite low."

Commenting on the Fed's recent policies, Tom Clancy of argued that Bernanke is using monetary policy to engage in a "currency war." Clancy, the Vice President of Research for a private bank managing over $1.5 billion in assets, wrote that "Monetary policy is now being used as a foreign policy tool to press the political advantage of the US and its domiciled corporations."

By keeping interest rates at record lows and implementing QE2, the U.S. has issued "a gentle reminder to the world," and China in particular, that "if you don’t buy more of our goods, we will ramp inflation in your economy until your people take to the streets.”

As the world's developed economies continue to devalue their currencies in order to stimulate economic growth, confidence in fiat money has waned. Based on the recent comments by Bernanke and Trichet, it does not appear that this trend is likely to end anytime soon.

The fragile relationship between the U.S. and China, which Clancy alluded to above, has added substantially to global economic uncertainty. Combined with real interest rates remaining firmly in negative territory, the gold price stands to benefit as competitive currency devaluations - a phenomenon that has been in place for the last five to seven years - accelerate.

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This article is independently provided by and does not represent the views or opinions of Goldline International, Inc. Although the information in this article 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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†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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