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Gold Price Surges to $1,400 on Weak Jobs Data

Friday December 3, 2010     

GOLD PRICE NEWS – The gold price ramped higher following Friday’s weaker than expected employment report.  The price of gold spiked $15.00 through the $1,400 per ounce level after the Labor Department announced that a mere 39,000 jobs were created in November – versus consensus expectations of 150,000.  The unemployment rate ticked up from 9.6% to 9.8% and investors, anticipating the continuation of easy money, flocked to gold and investments tied to the gold price.

The share prices of gold producers and explorers moved higher with the Market Vectors Gold Miners ETF (GDX) gaining 1% in pre-market activity.  Barrick Gold (ABX), the world’s largest gold producer gained 1.2% to $53.93 on the back of the surge in the gold price.  Gold bullion exchange traded funds were under accumulation as well with the SPDR Gold Trust (GLD) gaining $1.40 to $136.60 per share.

Chairman Bernanke has repeatedly emphasized the tepid labor market as being one of the key drivers of the Fed’s quantitative easing initiatives.  Today’s report will likely embolden the Bernanke to continue to push for an aggressive monetary policy to combat the lingering aftershocks of the credit crisis.  His commitment to run the printing presses to stimulate the economy has been the chief driver of higher gold prices.  The Fed’s assault on deflation has led investors to seek ways to protect their savings from currency debasement.  As a result, gold, and other hard assets, have appreciated – a trend that shows very few signs of abating.

Commenting on the jobs data, Stephen Bronars, a senior economist at Welch Consulting, stated that “It appears with all the numbers together, including unemployment rate, hiring numbers, and unemployment claims, it’s taking the unemployed a longer time to find work…The duration of unemployment is much longer in this recession.”

The U.S. dollar sank on the news and while the gold price rallied, the rest of the commodity complex did not.  Cyclically-sensitive oil and copper prices both turned lower on the weak jobs data.  Silver, however, did follow the gold price higher, adding 1.5% to $28.92 per ounce.

Over the past one month, the gold price has vastly underperformed when measured against its sister precious metal.  The silver price has gained 17.6% over the past one month and 44.3% over the past three months.  This compares to gains of 3.9% and 11.2% in the price of gold over the same time frame.

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