This week gold was up almost two per cent – giving it the largest weekly gain in five weeks. Initially gold was almost unchanged for the week, until the jobs report was out. Post the US Jobs data, gold rose on Friday, after they stated that job creation slowed over the past two months. This created waves of speculation in the market that the Federal Reserve will not taper its current stimulus.
Last week the Fed had released a statement that they will further taper its monetary stimulus program but given the slowing economic momentum, investors believe that this tapering will not take place in the near future.
Despite the slight fall in unemployment, the market’s reaction to the low employment numbers was enough to pull up the prices of gold and silver. Other commodities prices and the major stock markets also rally.
Following gold, silver too was up nearly 5 per cent this week. This is the biggest weekly gain since mid-August.
Platinum also posted small gain for the week on supply worries due to a possible strike in south Africa. However, latest news about government-brokered talks between the world 3 largest platinum producers and the mine union AMCU (Association of Mineworkers and Construction Union). The talks were to end a two week wage strike. Speculations regarding the strike caused the upward movement of platinum prices. Platinum was trading up 0.5 per cent at $1,378.50 an ounce.
For gold, following were the factors responsible for the gains-
1) Tumbling world currencies
2) Tumbling assets in emerging markets
3) Disappointing US Jobs data- Data showed U.S. employers hired far fewer workers than expected last month—nonfarm payrolls rose by 113,000, well below the consensus of 185,000—although the unemployment rate hit a five-year low of 6.6 percent.*
4) World Stocks- European stocks bounced back after an immediate negative reaction to the data, which is seen as a key gauge of the U.S. labour market
5) High demand for gold from China on account of the Lunar year
China returned to the physical gold markets strongly on 7 February, after a week-long break, as banks and retailers moved to replenish stock following solid sales during the Lunar New Year holiday. An increase in premiums and trading volumes on The Shanghai Gold Exchange, indicated that jewellery and bullion sales during the new year holiday were robust in the world’s biggest gold consumer.
Shanghai premiums for 99.99% purity gold climbed to $11 an ounce over London prices. They hovered at about $4 on 30 January just before China went on holiday. Trading volumes hit their highest in a month.
While in India, premiums fell to between $70 and $75 an ounce on 7th February, compared to $80 last week, owing to the higher availability of imported jewellery and smuggled goods.
Premiums across the rest of Asia remained largely stable.
Gold is expected to range between Rs.29,000- Rs.31,000 in the domestic market and $1231 to $1278 in the international market whereas silver is expected to range between Rs.43,000 to Rs.46,000 and $19.30 and $21.00 in the domestic and international markets respectively.
Recent data covering the speculative positioning by hedge funds still points towards short covering as one of the main driver behind the current strength, but until a sustained break emerges, many traders will still be viewing higher prices as good entry levels for selling the market.