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Weak U.S. Jobs Data, Overseas News Lift Gold

Release Date: 
Monday, April 9, 2012

Gold moved higher today, up more than $15 higher at $1647.80 per ounce at 7:20 AM Pacific Time on the New York Spot Market with silver higher at $31.94 per ounce. Disappointing U.S. jobs data for March brought renewed hopes for another round of quantitative easing. Overseas, an increase in Chinese inflation and the end of a 21-day strike by jewelry shop owners in India (the world's largest gold importer) also boosted gold prices.

Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong, said he is bullish on gold owing to the increased likelihood of U.S. quantitative easing if, as he believes, Fed Chairman Bernanke will focus on promoting GDP growth. Societe Generale expects U.S. GDP to be below the Fed's targets of 2.2% to 2.7% which could lead to further stimulus measures.

"While (they) do not believe that this report alone will propel renewed policy action in April, the door to further quantitative easing remains ajar and may shift the decision point to the June FOMC (meeting) as the Fed continues to monitor the incoming data," said Barclays Capital in a note. "Our economists note the report had an undeniably weak tone and will raise doubts about the strength of the labor market."

March inflation data for China was higher than expected. Li Ning, an analyst at Shanghai CIFCO Futures, suggested that China's pro growth monetary policy may support gold.

Indian jewelers ended their 21 day strike after the government indicated it would rollback new taxes on gold imports and sales. "All shops have reopened," said Prithviraj Kothari, president of the Bombay Bullion Association, a trade group. "Gold demand should pick up," Kothari said, adding that imports are expected to rise in April and May.

(Source: "PRECIOUS METALS: Gold Rises On US Jobs Data, End Of India Strike," Wall Street Journal, April 9, 2012; "Oil May Rise in Second Half, SocGen Says," Bloomberg, April 9, 2012; "PRECIOUS-Gold up 1 pct as US job data lifts hope for easing," Reuters, April 9, 2012; "PRECIOUS-Gold firms on China inflation spike, US jobs data," Reuters, April 9, 2012; "Indian Jewelers Call Off Strike," Wall Street Journal, April 6, 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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