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Jobs Report Shows Weak Labor Market

Release Date: 
Friday, July 6, 2012

Gold prices fell on Friday after the June employment report from the Labor Department fell short of analyst expectations prompting concerns of deflation.  Gold was $12.90 lower at 7:49 a.m. Pacific Time on the New York Spot Market, trading at $1,592.00 per ounce.  Spot silver was $0.44 lower, trading at $27.36 per ounce.  (Click here for the most current spot prices.)

The U.S. economy added 80,000 jobs in June with the unemployment rate fixed at 8.2 percent.  Economists had expected an increase of 100,000 jobs.

"The job market is soft," said David Resler, chief economic adviser at Nomura Securities International Inc., who correctly forecast the payrolls gain. "I’d characterize our reaction as much the same way the Fed will react -- not surprised but disappointed.  It’s just not the kind of growth we need to see at this stage in the business cycle."

"I interpreted that lower-than-expected job report would be supportive of gold, but (the metal) fell because of the weak euro," said James Steel, a commodity analyst at HSBC in New York.  Lower oil prices dragged on gold, Steel added.  He is bullish on gold in the long term, especially if monetary-easing talks resume, he said.

An HSBC research note also highlighted efforts by central banks to provide liquidity as potentially supportive of gold in the long term.  "While the ECB cut was near-term bearish for gold as it weakened the euro, it may be more bullish longer term. Added global liquidity with policy easing measures from the euro zone, China, and the Bank of England may stimulate demand for hard assets, including gold," HSBC said.

"The precious metals bounced strongly when the (payroll) numbers turned out to be below expectations.  But after all the data is a bit mixed: it is not bad enough to suggest the Fed will go ahead with a new round of quantitative easing but at the same time it is not good enough to exclude it," said T-commodity consultant Gianclaudio Torlizzi.

(Sources:  "Payrolls In U.S. Rose 80,000 In June; Jobless Rate 8.2%," Bloomberg, July 6, 2012; "PRECIOUS-Gold falls after poor U.S. jobs report," Reuters, July 6, 2012; "Gold extends losses after U.S. jobs report," MarketWatch, July 6, 2012)

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