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Gold Edges Up on Expectations for Ongoing Fed Stimulus

Friday, 7 Dec 2012 | 3:41 PM ET
Altrendo Images | Getty Images

Gold rose on Friday, rebounding from early lows, as upbeat U.S. nonfarm payrolls data did not alter a view that the Federal Reserve will continue to use bullion-friendly economic stimulus to boost growth.

For the week, bullion was down 0.7 percent for a second consecutive weekly loss.

The metal fell to a one-month low earlier in the session as safe-haven buying dried up after data showed U.S. employers hired more workers than expected in November and jobs growth remaining on a steady but slow path.

However, gold buying emerged as the market later focused on downward revisions to the job figures in September and October. A sharp decline in consumer confidence in early December and short-covering by funds also lifted gold prices.

Analysts also said that the encouraging jobs report was not enough to dash hopes of more Fed buyback of assets known as quantitative easing (QE) to ease worries about the fiscal cliff, referring to tax hikes and spending cuts set to kick in early next year.

"It's all about QE with these metals and I don't think there is any end of that in 2013," said Matthew Schilling, commodities broker at futures brokerage RJ O'Brien.

Spot gold edged up 0.2 percent at $1,702 an ounce, rebounding from a one-month low of $1,683.79.

U.S. gold futures for December delivery settled up $3.70 an ounce at $1,705.50, with trading volume more than 30 percent below its 30-day average, preliminary Reuters data showed.

The Labor Department said nonfarm employment expanded by 146,000 jobs last month.

"(Today's jobs data) doesn't remove the need for stimulus but might convince the Fed to opt for a smaller program," BK Asset Management managing director Kathy Lien said.

The payrolls data was being closely watched ahead of a policy meeting of the Federal Reserve next week. The Fed is expected to unveil a fresh round of bond purchases to battle a possible recession if the United States fails to resolve the budget crisis is prompting.

Many economists expect the U.S. central bank to announce monthly bond purchases of $45 billion after its policy gathering on Dec. 11-12. This will be on top of its September announcement of $40 billion in mortgage-backed securities until the job market dramatically improves.

Gold ETFs Hit Record Highs

Investors' appetite for physically backed funds held firm, with holdings of gold exchange-traded funds hitting record highs at 76.133 million ounces on Thursday.

However, gold imports from Hong Kong to China, one of the world's top bullion buyers, fell in October to their lowest in ten months, data showed on Friday.

Bullion buyers largely ignored a resurgent dollar which has risen for a third consecutive day and posted a 1.5 percent gain during that time.

Among other precious metals, silver was up 3 cents at $33.01 an ounce. Spot platinum was up 0.8 percent at $1,604.50 an ounce, while spot palladium was up 0.3 percent at $692.30 an ounce.

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PALLADIUM
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