Gold and Silver Fall Ahead of U.S. Jobs Data

By: Ben_Traynor

SPOT MARKET prices to buy gold in Dollars dropped to below $1710 an ounce Friday morning, reversing gains from earlier in the week, while stocks and commodities fell and the US Dollar rallied ahead of the release of key US jobs data.

The Bureau of Labor Statistics is due to publish its monthly 'Employment Situation' report at 08.30 EDT, which will include the official nonfarm payrolls estimate for the number of private sector jobs added in October. Consensus forecast among analysts is for 125,000 jobs added, while the unemployment rate is expected to tick higher to 7.9%, up from 7.8% in September.

Silver prices meantime fell below $32 an ounce this morning, extending losses from the day before.

"[Silver] bulls tried for a breakout [on Thursday] but were met with selling pressure," said a technical analysis note from bullion-dealing Scotiabank.

"Despite the disappointing close, downside momentum appears to have waned somewhat."

Like gold, silver traded lower Thursday following the release of a better-than-expected ADP Employment Report, a release that is widely regarded as an indicator for the official nonfarms release.

Over in India meantime, traditionally the world's biggest gold buying nation, Rupee prices to buy gold fell to their lowest in nearly a month, following gains this week for the Rupee against the Dollar.

"We are hoping for good Diwali sales," one jeweler told newswire Reuters, although trader noted that demand could dry up ahead of the November 13 festival should gold prices climb higher.

Heading into the weekend, gold and silver were little changed on the week by Friday lunchtime in London, although analysts say they expect the nonfarm payrolls release could impact on prices.

"If the nonfarm payrolls data is very good, it will be bearish for gold, as it will cut expectations for any additional quantitative easing, and it will be fairly positive for the Dollar as well," says Nick Trevethan, Singapore-based senior strategist at ANZ.

"If the payroll data is much above the 125,000 [jobs] consensus the Dollar is likely to go down," disagrees Standard Bank analyst Steve Barrow.

"The Fed is not going to respond to stronger-than-expected data with tighter policy and, more importantly, the interest rate markets are not going to expect the Fed to change course...instead, the focus clearly seems to be on the fact that firm data lifts stocks, lowers risk aversion and so tends to lift 'riskier' currencies against the 'safe-haven' Dollar."

A note from Swiss bank UBS this morning said funds tracking the DJ-UBS Commodity Index will need to buy gold and silver, since the precious metals are due to form a bigger part of the index when it is reweighted at the start of next year.

"In gold's case, its weight will be raised to 10.82% from 9.79% and silver will increase to 3.90% from 2.77%," UBS said.

"The settlement prices on the fourth business day of January will determine the final amounts to be bought."

Here in Europe, Eurozone manufacturing activity continued to contract last month, with the pace of contraction accelerating from September, according to purchasing managers index data published Friday. The single currency areas four biggest economies – Germany, France, Italy and Spain – all published PMIs below 50.

The Bank of England meantime said it welcomes three independent reviews into its operations, forecasting ability and handling of the financial crisis that were published Friday.

One review, that looked at the Bank's framework for providing liquidity to the banking system, concluded the Bank is "centralized and hierarchical...with a large decision-making burden residing with the Governor and senior management."

The review of the Bank's forecasting capability meantime said that "recent forecast performance has been noticeably worse than prior to the crisis, and marginally worse than that of outside forecasters."

In South Africa, AngloGold Ashanti, the world's third-largest gold mining producer, has suspended operations at the TauTona mine, with 300 protesting workers conducting a sit-in.

Earlier this week two striking coal miners were shot dead by security guards at South Africa's Magdalena mine, with reports saying the two men tried to break into the mine's armory.

By Ben Traynor
BullionVault.com

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.(c) BullionVault 2012

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