GOLD PRICE NEWS – The gold price surged higher Friday morning, by $49.77, or 3.2%, to $1,612.48 per ounce following a very disappointing report on the U.S. labor market. The spot price of gold hovered near $1,550 in overnight trading, but turned sharply upwards following the worse than expected non-farm payrolls report for May. The SPDR Gold Trust (GLD), the world’s largest gold ETF and a proxy for the gold price, soared by $5.28, or 3.5%, to $156.90 per share. With today’s gain, the price of gold reached its highest level since May 8 and returned to positive territory on a year-to-date basis, by 3.1%.
The May employment report showed that the U.S. economy added only 69,000 jobs, far below the 150,000 consensus estimate among economists and even less than the lowest forecast of 75,000. Furthermore, the April non-farm payrolls figure was revised downward from 115,000 to 77,000 while the March data was cut from 154,000 to 143,000. As for the unemployment rate, it climbed from 8.1% to 8.2%.
Commenting on the jobs data and the implications for the gold price, Saxo Bank vice president Ole Hansen stated that “(The report was) very poor and confirmed the midcycle slowdown in the United States. Whether it will be enough to change the mind of the Fed towards additional QE remains to be seen. At least the gold market believes it could happen.”
Silver climbed in concert with the price of gold, by a smaller but still considerable amount. The spot price of silver slid to as low as $27.18 per ounce ahead of the jobs report, but subsequently jumped to as high as $28.53 in morning trading. Among other precious metals, platinum futures recouped all of their earlier losses to trade near unchanged at $1,418.20 per ounce, while palladium rebounded to $612.38 per ounce. The sector was boosted in part by weakness in the U.S. dollar, as the greenback fell 0.2% against a basket of foreign currencies.
Gold stocks followed the yellow metal higher as well, with the Market Vectors Gold Miners ETF (GDX) rising $1.83, or 4.2%, to $45.61 – its best level since May 2nd. Several of the world’s largest gold producers posted significant gains, including Agnico-Eagle Mines (AEM) and Newmont Mining (NEM). Shares of AEM climbed by 6.2% to $39.66, while NEM advanced 5.6% to $49.80.
Strength in the gold sector stood in stark contrast to the broader equity markets, which tumbled following the dismal employment data. The Dow Jones Industrial Average (DJIA) dropped 143.19 points, or 1.2%, to 12,250.26 while the S&P 500 Index slipped 18.43 points, or 1.4%, to 1,291.90. Risk aversion rose concurrently, with the CBOE Volatility Index climbing 4.4% to 25.11.
Tom Porcelli, chief U.S. economist at RBC Capital Markets, wrote in a note to clients that “It is increasingly obvious that we are in the midst of a global economic slowdown. This puts the (Federal Reserve) firmly in play and they will likely feel compelled to respond.”
“The missing ingredient preventing the Fed from action had been the equity market, but now we are seeing it softening,” Porcelli added. “Equities are falling and that was the last hurdle for Fed policy action because all the other criteria have been met.”
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