Gold Price Slips on Jobs Data, but Decline Muted by QE3 Pledge

GOLD PRICE NEWS – The gold price fell modestly on Friday after the latest U.S. monthly jobs report showed that the nation’s unemployment rate fell to 44-month low.  The spot price of gold remained down by $10.48, or 0.6%, at $1,780.85 per ounce in afternoon trading above $1,790 prior to the release of the jobs data.  The SPDR Gold Trust (GLD), the world’s largest gold ETF and a proxy for the gold price, slid $1.28, or 0.7%, to $172.33 per share.

Silver declined in concert with the price of gold, by $0.41, or 1.2%, to $34.61 per ounce.  Precious metals equities headed south as well, as the Philadelphia Gold & Silver Index (XAU) retreated by 0.7% to 192.25 this afternoon.  Notable XAU components in the red included Newmont Mining (NEM) and Silver Standard Resources (SSRI) – which fell by 0.6% to $55.88 and by 2.1% to $15.69 per share, respectively.

The U.S. non-farm payrolls report for September revealed that 114,000 jobs were added last month, only fractionally below the 115,000 consensus estimate among economists.  More significantly, the closely-watched unemployment rate declined from 8.2% to 7.9% – its lowest level since January 2009.  Furthermore, revisions to the July and August reports added 86,000 jobs.  On the downside, however, was that private payrolls added only 104,000 in September – well under the 130,000 level economists were expecting.

Commenting on the implications of the employment data for the gold price, Standard Chartered analyst Daniel Smith stated that “I think generally the data was quite positive for risk appetite so we may have seen some safe haven buying coming out of gold.”

Despite the encouraging report, today’s sell-off in gold prices was muted by the fact that the Federal Reserve – led by “Helicopter” Ben Bernanke – has stated that it will maintain its open-ended third round of quantitative easing (QE3) even as the U.S. economic outlook improves.

In addition, speculation rose amongst investors and market observers that today’s non-farm payrolls data may have been manipulated by the government in order to help President Barack Obama in his re-election bid.  Jack Welch, the former CEO of General Electric, tweeted the following message: “Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers.”

While the timing of the improved unemployment rate deservedly raised some eyebrows, it is doubtful that the administration would conspire in such a manner due to the likelihood of the truth getting out and ruining Obama’s chances of serving a second term.  Nonetheless, several Federal Reserve Presidents have noted recently that they do not believe QE3 should be concluded until the unemployment rate drops to 6%.

While the Fed has not committed to a specific level before they turn off the printing presses, the combination of unprecedented monetary printing programs and negative real interest rates is likely to remain for the foreseeable future and thus provide a very favorable backdrop for the gold price.