Futures Market News
Gold futures fall after strong labor report
Oct 05, 2012 11:46 AM
A stronger-than-anticipated jobs report issued on Friday by the U.S. Department of Labor pulled gold futures from its top value in 11 months, Reuters reports.
But the Friday trading session began with the precious metal gaining. After the federal agency released data stating September saw the creation of 114,000 jobs, the yellowish metal slipped from prices higher than $1,795 per troy ounce.
Analysts said the jobs report was pivotal because it indicated that the host of the world's largest economy is not sliding into an economic recession.
"I think generally the data was quite positive for risk appetite so we may have seen some safe haven buying coming out of gold," analyst Daniel Smith with Standard Chartered told the news source.
At 10:33 a.m. on Friday, gold futures fell 0.44 percent, a $7.9 percent drop to $1,788.60 per troy ounce.
3Q gains
But how long those losses will persist is another matter.
Worldwide central banks last month announced efforts to intervene and boost the national economies they support during the recovery from the Great Recession.
Monetary policy of financial institutions like the U.S. Federal Reserve, the European Central Bank and the Bank of Japan prompted the price of gold futures to climb 10 percent during the third quarter of this year.
In addition to purchasing debt, the central banks also are opting to preserve the low level of interest rates.
"I think there are some good perspectives for gold going forward given that we've had promises from major central banks to keep interest rates low for a very long time," Christen Tuxen with Danske Bank told the news source.
On Thursday, the European Central Bank opted to keep interest rates intact at their low level. The bank also indicated it is prepared to purchase debt of member countries of the 17-nation bloc.
Friday's early gains
The Wall Street Journal reports the Friday trading session kicked off with gold increasing in value amid aspirations of additional stimulus by the European Central Bank.
The precious metal moved ever closer to the milestone price of $1,800 per troy ounce when checking in at $1,795.60 per troy ounce.
Bullion most recently was north of that milestone price in early November of last year when it was worth nearly $1,803 per troy ounce.
While gold was nearing that threshold price, the U.S. Department of Labor released the jobs information, which is considered an indicator of economic health.
Minutes demonstrate Fed motive
MarketWatch reports the policy making arm of the U.S. Federal Reserve released minutes from its meeting last month, when the body opted to move forward with the third round of quantitative easing.
The Federal Open Market Committee cited two primary reasons as to why it supported additional intervention.
The laggardly pace of job growth in the U.S. labor market and growing concerns about the sovereign debt crisis in the euro zone prompted the policy makers to move forward with QE3.
Forward-looking forecast
Deutsche Bank strategists project the price of gold to continue increasing as a result of two principal concerns.
Preoccupations about the fiscal outlook during the fourth quarter of this year are forecast to gain momentum and grow stronger, according to the strategists.
Also of concern is the possibility of another reduction to U.S. credit. That, too, is likely to benefit the price of gold as the year drives toward an end.
"This will prove to be most beneficial to the precious metals complex and specifically gold," states a report penned by the strategists, according to MarketWatch. "Seasonal factors may also come into play and encourage exchange traded fund flows into gold at the end of the year since there has been a tendency of the U.S. dollar to display weakness during December."
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