Gold weekly recap, January 6 – January 10

Gold rallied on Friday to settle the week at one-month high, after a report by the Labor Department showed the US economy created the least jobs in almost three years, easing concerns the Federal Reserve will further reduce its bond purchases at FOMC’s upcoming meeting. A weaker dollar further supported the metal.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in February increased by 1.50% on Friday to settle the week at $1 247.80 per troy ounce. Prices touched a session high at $1 248.40, the strongest level since December 16th, while day’s low was touched at $1 227.00 an ounce. Gold futures settled the 5-day period 0.95% higher, after adding 1.95% in the previous week. However, the precious metal settled last year 28% lower, the steepest annual decline since 1981.

Fed stimulus outlook

Gold was supported on Friday after worse-than-expected employment data curbed fears the Federal Reserve might reduce further its monthly bond purchases at FOMC’s upcoming meeting. The Department of Labor reported that US employers added 74 000 jobs in December, the least since January 2011, sharply underperforming expectations for a moderate retreat in job creation to 196 000 payrolls. November’s reading received an upward revision to 241 000 from initially estimated at 203 000.

Following the report, Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview, cited by Bloomberg: “The growth concerns are back and we are seeing a flight to safety, the chatter about the Fed having to postpone tapering is back.”

On the other hand, the rate of unemployment in the country dropped significantly, reaching 6.7% in December from 7.0% in the preceding month, marking the lowest rate since October 2008. However, this came as a result of a larger percentage of US citizens leaving nation’s work force. Preliminary estimates pointed that US unemployment rate will remain unchanged in December.

Fed Chairman Ben Bernanke said on December 18th that the Fed will continue to probably do a measured reduction in the pace of purchases at each meeting. According to a Bloomberg News survey of economists conducted on December 19, policy makers will cut Fed’s stimulus in $10 billion increments over the next seven committee meetings.

The downbeat US data weakened the US dollar. The US dollar index, which measures the greenback’s performance against a basket of six major peers, fell by 0.4% on Friday to settle the week at 80.75. The March contract lost 0.2% in the previous day and settled the week 0.4% lower. Weakening of the greenback makes dollar-denominated commodities cheaper for foreign currency holders and boosts their appeal as an alternative investment.

However, assets in the SPDR Gold Trust, the biggest bullion-backed ETP, remained at a 5-year low of 793.12 tons on Friday, data on the website showed. The fund has lost 41% of its holdings in 2013. A total of 553 tons has been withdrawn in 2013. Billionaire hedge-fund manager John Paulson who holds the biggest stake in the SPDR Gold Trust told clients on November 20 that he wouldn’t invest more money in his gold fund because it isn’t clear when inflation will accelerate.