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Rising Euro, Oil Support Gold as U.S. Payrolls Rise

Release Date: 
Friday, March 4, 2011

Gold prices rose following the release of U.S. payroll data on Friday, helped by a rising euro versus the dollar and higher oil prices based on tension in the Middle East, CNBC reported.

The Wall Street Journal reports that U.S. nonfarm payrolls rose by 192,000 in February as private-sector employers added 222,000 jobs, better than the 200,000 jobs expected by economists in a survey conducted by Dow Jones Newswires. Unemployment fell to 8.9%, versus the prior month’s 9.0%, the first time it dipped below 9% since April 2009.

The euro rose against the U.S. dollar after comments by European Central Bank President Jean-Claude Trichet fueled expectations of higher interest rates in the euro zone, supporting metal prices, the Journal reports. A Commerzbank research note on the gold market indicates that “prices should be supported by the weakening of the U.S. dollar versus the euro expected to result from (a rise in euro zone rates), as the U.S. Fed is still not making any moves to tighten its monetary policy.”

Bloomberg notes that the turmoil in Libya and inflation concerns could potentially help extend gold’s longest weekly-gains run in more than three years. Libyan opposition leaders rejected a mediation offer by Venezuelan President Hugo Chavez while rebels fought for control of coastal oil ports, further fueling uncertainty. Oil prices rose to 2-1/2 year highs above $100 a barrel last week. Bank of America-Merrill Lynch analysts also focused on inflation as a driver of gold prices, noting, "The recent increase in inflation concerns, particularly in emerging markets, goes beyond the oil market and the current events in the Middle East and North Africa."

(Sources: “Employment Data Signal Economic Improvement,” “Spot Gold Up as Investors Await Payrolls Report,” The Wall Street Journal, March 4, 2011; “Gold Touches Session Highs After US Payrolls Data,” CNBC, March 4, 2011; “Gold May Extend Longest Weekly-Gains Run in More Than 3 Years on Mideast,” Bloomberg, March 4, 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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