GO
Loading...

Unemployment Decline Gives Gold Long-Awaited Boost


Gold has been in a world of hurt lately, taking two straight quarters of losses and unable to rally despite any number of supposed tailwinds. But something happened on Friday that gave the precious metal a long-awaited boost: The unemployment rate fell to a four-year low.

U.S. employers hired at the slowest pace in nine months in March, adding just 88,000 jobs, while the unemployment rate notched lower to 7.6 percent, largely because people dropped out of the workforce, according to the Labor Department. The unemployment rate is the lowest since December 2008; the labor force participation rate is the lowest since 1979. Analysts polled by Reuters had expected a gain of 200,000.

(Read More: US Job Creation Plunges, but Rate Drops to 7.6%)

Source: World Gold Council

Earlier this week, private sector employment and jobless claims data indicated weakness in the labor market. Reports on the manufacturing and services sectors also disappointed.

(Read More: Unemployment Rate Falls, but Hold the Champagne)

But immediately after the jobs data was released on Friday, gold rose to a session high of $1,571.91 and was last 1.1 percent higher at $1,568 an ounce—still down about 2 percent on the week and heading for its second week of declines.

So why was gold finally able to push higher?

The theory here is that the series of weaker-than-expected data points have made it slightly more likely that the Federal Reserve will have to up the ante and increase qualitative easing, a monetary policy in which the central bank prints money to buy government securities or other types of securities from the market.

(Read More: Forever Fed: Jobs Blues Sets Up Eternal Easing)

Our long gold trade from Thursday's "Futures Now" show worked nicely, as we had an exit level of $1,575, and June gold traded up to a high of $1,576. However, the quick rejection of those higher levels leads me to believe that there are definitely people who believe that the long-term story in gold has changed and who are looking for strength to sell into. At the moment, I cannot argue with them.

If June gold futures trade up to $1,585, I would consider this an opportunity to sell the market for a retest of the $1,537 lows. Baked into this theory is the assumption that the economic data are experiencing a spring swoon. If the data begin to deteriorate more quickly, we should see the market patch up its differences with gold as a safe haven vehicle. The signal for this reconciliation would be a settle above $1,588.

— CNBC.com and Wires contributed to this report

Watch "Futures Now" Tuesdays & Thursdays 1p ET exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow

Follow us on Twitter! @CNBCFuturesNow

Contact Futures Now

  • Showtimes

    Watch Futures Now Tuesdays & Thursdays 1p ET exclusively on cnbc.com!

Sponsor Links

  • CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.

  • Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.