India, US jobs news should lift gold next week

The gold price has been under pressure recently due to the slump in Indian imports after a three-week strike that ended on Friday and disappointment over US Federal Reserve minutes released this week that showed a third round of monetary policy easing – so-called quantitative easing or QE3 – is not likely to happen.

June gold contracts ended the holiday shortened week at $1,632 an ounce, but the end of Indian strike and much-worse-than-expected news about job growth in the US should provide stimulus for renewed interest in the yellow metal:

After 3 months of job growth averaging nearly 250,000, March employment figures released out on Friday – a day the markets were closed and could not react – showed just 120,000 new jobs created. Even though the employment rate fell to 8.2%, the number was the result of fewer people seeking jobs.

The weak economic figures puts the pressure back on Ben Bernanke, the Fed chairman, argues the Wall Street Journal:

 

Jason Schenker, president of Prestige Economics, said the employment numbers also put the heat on Fed Chairman Ben Bernanke when he gives a scheduled speech in Atlanta on Monday evening.

Bernanke will likely "reassure markets in the wake of this weaker piece of jobs data, and…hint at potential additional actions available to the Fed," Schenker said.

 

The first round of quantitative easing was in response to the financial crisis of 2008/2009 and QE2 ended in June last year. During that time the US central bank bought more than $2 trillion in debt and the price of gold rose 70%.

Gold is down from its 2012 high of $1,790 an ounce hit at the end of February and an all-time high of just above $1,900 an ounce reached in September last year.