Gold ends week higher on US labor data
New York (Jan 11) Gold prices retreated in the first half of the week, dragged down by US dollar, boosted by upbeat fundamentals and fresh speculation on further tapering following the Federal Reserve (Fed) minutes. Bullion recovered at the end of the week and climbed higher as US non-farm payrolls undermined the greenback.
Gold futures were falling from Monday when gold saw its weekly high of $1,247.79. Shrinking US deficit data released on Tuesday sent gold prices to the lowest level in the week at $1,219.68. Following the non-farm payrolls on Friday, gold extended gains and closed the week at $1,247.90, 0.85% higher compared to previous week's close.
US employment data
With labor market developments representing one of the major factors influencing the Fed's monetary decisions, Friday's government figures were no doubt the most anticipated of the week.
US non-farm payroll data showed 74,000 new jobs in December, after a upwardly revised 241,000 in the previous month, according to the Bureau of Labor Statistics. The data came well below analysts forecast of 197,000.
The unemployment rate was seen lower in December, standing at 6.7%, down from 7.0% in November.
On Wednesday, the latest ADP employment report revealed a larger-than-expected number of people hired by the US private sector businesses last month. The reading showed 238,000 newly employed people, which compares to the expected 200,000 and November's upwardly revised 229,000 newly created positions.
The December Federal Open Market Committee (FOMC) meeting minutes revealed that few members wanted to lower the unemployment rate threshold to 6%. The compromise was to keep the current 6.5% handle, and add a paragraph, which essentially nullifies the threshold.
Moreover, most FOMC members felt comfortable with tapering in December, preferring a modest initial reduction.
FOMC minutes
Gold prices continue to be directly linked to what's happening on the US labor market. The further tapering of stimulus will add to US dollar strength, which correlates inversely with gold prices.
Policymakers confirmed that the pace of bond and mortgage-backed securities buying was not on a preset course and is dependent on labor market conditions together with the efficacy and costs of purchases.
The minutes revealed that "most participants saw a reduction in the pace of purchases as appropriate at this meeting." Finally, participants said that inflation needs to be monitored "carefully".
