Gold ascent resumes following jobs report

Good Morning,

After having traded some $40 below the $1,266.00 pinnacle that had been achieved just 24 hours ago, gold prices attempted to regain their lost footing during the overnight hours. The advent of a bearish signal on Thursday had market participants on edge and, perhaps more than on many a past Friday, on the lookout for the Labor Department’s assessment of the US unemployment scene.

The decline that gold experienced from the aforementioned peak was the largest in about two months’ time. Fund participation is continuing to define this market – and that is not a factor to draw comfort from, not at all. Today’s potential gains following a less-than-stellar jobs report could erase much of the Thursday price collapse.

However, judging by the volatility in prices that followed the release of the jobs figures (a sharp, $10 upward spike, followed by…a slippage in values back into negative territory), it could still shape up to be a wild ride of a day…Yesterday, Dennis Gartman remarked that “the fact remains the [gold] fever is high and fevers break. So too shall this one. When it does, a $100/ounce break in price will be swift, violent, and certain.”

Yesterday’s drop in initial jobless claims and the dollar-supportive statements made by…the ECB’s (!) Mr. Trichet were sufficient in triggering a mini-run for the exit doors among hitherto uber-confident gold speculators. Late-arriving retail investors were, as usual, left scratching their heads as to why the cocksure prognostications for a lunar landing in gold prices, made on the very morning of Thursday, did not materialize by, say, day’s end – as had been the case for some two weeks.

At any rate, on the demand side of the gold fundamentals, the market appears to have lost at least one foot-soldier, in the form of AngloGold Ashanti. The firm is thought to have bought nearly 100 tonnes of yellow metal over the past ninety days (thus lending credibility to the school of thought that sees it as a major contributor to the gold price spike that became manifest during the period) as its hedge book was euthanized.

The firm now says that it will ‘enjoy’ full ‘exposure’ to the gold price. Come what may… Meanwhile, the World Gold Council said it “expects” central banks to become net buyers of gold next year. Indeed, ‘expects’ -in this case- is sounding a bit more like a demand than an assumption. The jury remains very much out on the behavior of the official sector and inconsistency continues to define that niche. Thus, one ought not to bank too much on…banks.

This morning’s spot gold dealings managed to open the final session of what has certainly been a tumultuous week with a small, 80-cent gain and a quote of $1,334.40 on the bid-side of spot prices. Dollar strength was being offset by some modest physical buying as shown on the Kitco Gold Index (now celebrating its first birthday). Silver prices added one dime on the open, starting the Friday session off at $22.60 following yesterday’s mini-rout in values.

Platinum shed $8.00 on the open, with spot prices being quoted at $1,687.00 per ounce while palladium was off by $2.00 at $581.00 the ounce. Several luxury car makers (Mercedes and BMW among them) reported improved September unit sales. Norilsk Nickel, the global leader in palladium production, said this morning that Russian state stockpiles of the noble metal may be ‘finished’ come 2011.

Palladium has been the stand-out performer in the precious metals complex in 2009, as well as this year. In the background, the US dollar was climbing on the index (last seen at 77.58) and crude oil fell 84 cents (to $80.83) ahead of the release of the US jobs data. Dow futures were aiming lower just ahead of the numbers from the Labor Department.

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