Gold Price Spikes as Jobs Disappoint
The spot gold price for one ounce of gold at the New York close on the 6th was $1,138.10. The current rate is $1,130.70. A stall in the positive move for the dollar and some less than exciting news on the economic front have propped gold up again, at least for the short term. The dollar was picking up steam to close out 2009, but recent housing data was not as impressive as expected.
Friday’s (January 8th) jobless claims report is likely to increase gold buying as it shows there is still plenty to accomplish on the economic front. There was an unexpectedly high 85,000 job cuts during December according to the U.S. Labor Department report. Unemployment remained steady at 10 per cent, though many are suggesting that this has as much to do with people leaving the workforce. The job market is one of the final major hurdles as the economy tries to get back on solid ground. Job cuts show that some companies are still concerned about the cost of doing business and do not yet have complete faith that the economy favors strong profitability.
All of these economic concerns contribute to renewed interest in the “safe money” investment of gold. The gold price typically moves counter to sentiment on the US economy. When investors are confident, they choose more high-risk growth investments like equities. However, the more cautious investor likes gold because it remains one of the safest real money investments.
The gold price climbed nearly $20 in short order after Friday’s job announcement, from a spot rate near $1,119 to just over $1,138 (the largest intraday price in over a month). The emotional buying and momentum have waned since, which has brought the price down to its current level.
The price of gold is not likely to move significantly in either direction for the near future. While some top analysts called for $2,000 gold in mid-December, it is hard to imagine this happening in the near to medium term future if the economy appears to be holding its own. If jobs and other laggards on the economic front demonstrate strong improvement in the coming weeks, a lower gold price is more likely.
Article written by Neil Kokemuller