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November Jobs Data Beat Expectations

Release Date: 
Friday, December 7, 2012

Gold prices moved higher as November employment data in the U.S. beat expectations.  Gold was $3.60 higher at 7:47 a.m. Pacific Time on the New York Spot Market, trading at $1,704.60 per ounce.  Spot silver was $0.12 higher at $33.25 per ounce.  (Click here for the most current spot prices.)

The U.S. added 146,000 jobs last month, Labor Department reportedtoday beating analyst expectations of 80,000 new jobs.  The unemployment rate fell to 7.7%, the lowest level since December 2008. This reduction, however, was, largely from people leaving the work force.

“There is speculation that the U.S. November unemployment rate fell to 7.7% due to certain cyclical factors which may not be there in December,”  Mr. Karnani said, “unless gold gives a negative quarterly return for two successive quarters in 2013, investors will flock to invest in gold.”

UBS AG analyst Edel Tully commented on the upcoming Federal Reserve meeting and possible further quantitate easing. “[A]ny aggressive move by the Fed would prompt a sizeable response.” Index rebalancing will also cause gold to be bought, UBS said in a precious metals report today.

Some economists expect the Fed to announce monthly bond purchases of $45 billion after its policy meeting.  "(Today's jobs data) doesn't remove the need for stimulus but might convince the Fed to opt for a smaller program," BK Asset Management managing director Kathy Lien said.

“Gold investment demand is preventing gold prices from a fall,” said Chintan Karnani, chief analyst at New Delhi-based Insignia Consultants. “Globally…despite bearish calls in gold by some of the hedge funds, investors have largely ignored such bearish calls and continue to invest in gold,” he said.

“Asian gold investment sentiment is very bullish for next year,” the analyst noted. “Asians are investing in gold in a huge way. Indian gold prices have fallen nearly 4% from the all-time high in November, which has resulted more gold investment demand in India.”

(Sources:  “UBS Says a Fed QE Move Next Week ‘Not Priced In’ for Gold,” Bloomberg, December 7, 2012; “PRECIOUS METALS: Gold Bounces From One-Month Low,” Wall Street Journal, December 7, 2012; “Gold futures inch up, hold ground above $1,700,” Marketwatch, December 7, 2012; “PRECIOUS-Gold rebounds after hitting 1-month low on US jobs data,” December 7, 2012)

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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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