Gold Edges Back Over US$1300

Gold edged back above the $1300 stronghold on Friday after the US job data report was slightly lower than forecast. Speculators had forecast between 195,000 and 200,000 jobs would be added to the non-farm payroll (NFP) in March, but employers fell short by around 3000.

Before the report was released gold prices were ringing in at $1293.90. Two minutes later it was up almost $10. Much of the buying was due to traders offsetting earlier selling positions. Given the softer than expected data, there is a doubt that the Federal Reserve will increase interest rates in early January.

The US job market strengthened over the winter despite harsh weather conditions and the figures had given analysts optimism that the job market would improve more and the recovery of the economy would accelerate. The figures for March show the US economy is improving, albeit slower than analysts thought.

Gold prices expected to rise

Studying the technical data gold prices could continue to rise next week. If prices close around the current spot price of $1302 an ounce, it may prompt a spending spree to hedge against a weak dollar and under-invested funds.

Furthermore. CME Group has announced intentions to lower margins on precious metals at the end of today’s trading which will mean that traders can buy gold and silver with a discount on deposit. The move is expected to boost speculative activity in gold future market next week.

However, earlier in the week positive data showing private employers had stepped up recruitment is an indication that the economy is beginning to accelerate which may prompt them to take more risks. The NFP numbers were lower than policymakers had hoped for, but they are by no means disappointing.

Central bank traders

Gold imports to Iraq and China have also stimulated gold prices. China is known to have been buying huge quantities of gold for almost two years and although the People’s Central Bank scaled back sales in March, the Republic has still accumulated more than 200,000 tonnes of the yellow metal since the turn of the year.

The central bank of Iraq also announced it added another 36 tonnes of gold to take reserves up to 90 tonnes. Iraq has not purchased gold since August 2012 so to splash out $1.5bn dollars in a month is a massive turnaround. The official statement is the bullion purchase is in order to stabilise the nation’s currency.

This is standard procedure for central banks and with the volatility of the currency market, the net buying of gold should sound alarm bells for paper currencies. The dollar weakened again today, and a handful of other currencies in major markets look to be on shaky ground. With world currencies on a downtrend, bullion prices will go up.

For the time being gold prices hang in the balance and could go one way or the other. It will be interesting to see where market sentiment lies with traders next week, but it seems as though the best time to buy bullion will be early in the week.