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Metals Respond to U.S. Jobs Report and Dollar

Release Date: 
Friday, May 6, 2011

Commodity prices rebounded today after being broadly sold yesterday. Precious metals and crude oil gained after a closely-watched U.S. jobs report indicated better than expected economic growth in the world's largest economy.

U.S. payrolls increased by 244,000 workers in April, the biggest gain since May 2010, following a revised 221,000 gain the prior month. Economists had projected a rise of only 185,000 jobs in April according to the median estimate in a Bloomberg News survey. Although the U.S. unemployment rate notched higher to 9% from 8.8%, investors responded positively to the jobs lifting both the stock and precious metals markets.

The dollar was higher in early trading today, but lost ground following the government jobs report. The reaction of the dollar to the non-farm payrolls number is important for metals prices, with gold and silver generally benefiting from a weaker dollar.

Commenting on the volatile week in commodities trading, Michael Lewis, head of commodities research at Deutsche Bank, said "My sense is precious metals will stabilize." High commodity prices have yet to crimp demand as inventories are tight and getting out now would be "premature," said Hussein Allidina, the head of commodity research at Morgan Stanley in New York. Morgan Stanley, operator of the world's largest brokerage, is still "very long" crude and corn, and favors wheat and gold, Allidina said.

(Sources: "Commodities Rebound After U.S. Jobs Report Signals U.S. Economic Growth," Bloomberg, May 6, 2011; "PRECIOUS-Silver bounces from 12 pct fall, gold up ahead of US jobs," Reuters, May 6, 2011; "Stocks rally after strong jobs report," CNNMoney, May 6, 2011; "Silver Slides More, Bargain Hunters Help Gold," CNBC, May 6, 2011; "Commodities Drop Most in Seven Weeks on Signals Economic Growth Is Easing," Bloomberg, May 5, 2011)

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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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