Gold Prices Surge as US Jobs Data Slip, But China's Demand "Tracks 2012, Needs Drop"
New York (Apr 6) Gold prices whipped around the release of US jobs data Friday, reversing the week's previous 1.3% drop to touch $1300 for the first time in 7 sessions.
After gold prices had gained $10 ahead of Wednesday's ADP version of Non-Farm Payrolls – only to slip back a day later – the metal rose sharply again this morning in London, surging to $1297 just before the official US jobs data.
Gold prices then dropped and jumped again as the data showed 192,000 net new jobs for March – below February's upwardly revised figure of 197,000.
"It is NFP Friday again," said Walter de Wet earlier at South Africa Standard Bank's commodity division – currently being acquired by China's ICBC Bank – "and so gold is under scrutiny."
Predicting an "asymmetrical" response to the Non-Farms jobs data by gold prices – falling hard on a good number, but rallying only a little if bad – "Gold might well rally, but we expect it to fade fast," de Wet said.
Because "US long-term rates expected to rise", that would raise the opportunity or financing cost of physical gold bullion or derivatives positions respectively.
"Furthermore," says Standard Bank's commodities team, "Asia's physical gold demand continues to track trends seen in 2012 rather than those of 2013. We believe that demand will pick up only when prices weaken."
Chinese gold demand is "soft", says Reuters, quoting "sources" who say China's licensed banks have cut their gold imports recently.
"Volume has fallen quite a bit partly due to the weakness in Yuan," says one bullion bank insider.
"In the last four weeks, we have seen pretty poor demand."
Shanghai gold contracts closed Friday at a discount of $3.95 per ounce to London prices.
Usually trading at a premium thanks to local demand, shipping and the extra costs of refining to the 0.9999 purity preferred by Asian markets, China gold prices have now extended this rare discount to international benchmarks to a full 5 weeks.
Looking at US rates, "Gold prices failed to bounce higher" last week after new US Fed chair Janet Yellen "tried to dampen rate hike expectations," say ABN Amro analysts in a note.
"This is a signal that investors in gold believe more monetary stimulus is unlikely and they fear higher interest rates."
Forecasting a strong Non-Farms Payroll report, "Gold prices may even already drop below our end of June projection of $1250 per ounce."
