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U.S. Data Shows Low Job Growth, High Unemployment

Release Date: 
Friday, June 3, 2011

Gold rose today on speculation that the U.S. Federal Reserve will keep interest rates low to stimulate the slumping U.S. economy, sending the U.S. dollar lower against a basket of currencies. The dollar is on track for its third straight weekly decline. The price of gold was $1536.00 per ounce at 7:00 a.m. Pacific Time on the New York Spot Market.

Non-farm payrolls rose by 54,000 in May as the private sector posted the smallest jobs gain in eight months. The jobless rate unexpectedly rose to 9.1% in May. There are almost 13.9 million Americans searching for work. Economists surveyed by Dow Jones Newswires had forecast payrolls would rise by 160,000 and the jobless rate would edge lower to 8.9%.

"We've seen the data stream take a turn for the worst," said Matt Zeman, a strategist at Kingsview Financial in Chicago. "Traders are not convinced there won't be further measures taken to keep borrowing costs low. In an uncertain economic environment, gold is a good choice."

"If the payrolls data turns out worse than expected, it may help gold advance towards the record high in the next few days," Hou Xinqiang, an analyst at Jinrui Futures, said before the numbers were released, adding that gold was still on an upward trend.

"Wobbly economic numbers are shoring up demand for gold as the dollar's decline provides further support," said Hwang Il Doo, a Seoul-based senior trader with KEB Futures Co. "Growing economic and geopolitical uncertainties will help cement bullish sentiment for gold."

"Gold's causal driver is global liquidity, of which only one-third is the Fed's balance sheet," analysts including Walter de Wet at Standard Bank Plc wrote in a note. "The other two-thirds of liquidity are driven by global government borrowing. We do not believe that government borrowing in nominal terms is about to decline."

Fifteen of 17 traders, investors and analysts surveyed by Bloomberg, or 88 percent, said gold prices will rise next week.

(Sources: "Jobless Rate Rises as Pace of Hiring Slows," The Wall Street Journal, June 3, 2011;

"Gold Rises Most in a Week as U.S. Jobs Data Signals Fed May Keep Rates Low,"

Bloomberg, June 3, 2011; "PRECIOUS-Gold steady; trade thin as US jobs data eyed," Reuters, June 3, 2011; "Gold May Extend Two-Week Advance on Slowing Growth, European Debt Concern,"Bloomberg, June 3, 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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