After Monday’s wild ride when gold’s highs and lows were nearly $80 an ounce apart and the silver price bounced an eye-watering 18.7% from bottom to top, relative calm returned to the market mid-week.
But Friday’s blockbuster US employment report that showed 321,000 jobs created in November across a broad range of industries, injected fresh volatility into precious metals.
In afternoon trade on the Comex division of the New York Mercantile Exchange gold for February delivery was changing hands for $1,191.20 an ounce, down $16.50 or 1.4% from Thursday’s close after recovering from a dip to $1,187.
As is usual silver investors received more body blows, but again the downside was fairly limited with March contracts dipping 1.7% to $16.29, recovering from a day low $16.22 an ounce.
Given that many economists have brought forward Federal Reserve interest rate hike expectations; a big negative for gold which produces no yield and is strongly inversely correlated, the damage may have been greater.
Particularly since the jobs data gave another boost to the already rampant US dollar which reached a more than 8-year high against the currencies of its major trading partners – gold and the dollar usually move in opposite directions.
The gold price was also resilient against a renewed slide in crude oil with Brent dipping below $70 a barrel for the first time since February 2010. Gold and oil prices tend to move in tandem and gold was beginning to look expensive compared to crude.
Another factor that adds pressure to the gold price is a fresh climb in US equities with the Dow Jones within striking distance of the 18,000 level and the broader S&P500 index also advancing despite weak utilities and energy stocks. Both indices reached new intra-day record highs after the release of the economic data.
Despite all the negatives on paper markets, gold’s gains since hitting four-year lows early November still top 4% while silver has advanced 5.4% over the same period.