Los Angeles, CA – August gold future contracts rose sharply Friday on fresh unemployment news out of the United States and deepening fear that the global economy has taken a turn for the worse. August gold contracts on the Comex division of the New York Mercantile Exchange rose to $1626.30 an ounce, up almost 4% for the week. July silver also followed suit, moving up to $28.39, or .45% on the week.
Strong evidence that the global economy is slowing surfaced on Friday as newly released Chinese and European manufacturing data came in much lower than expected and the rise of the Eurozone unemployment rate jumping to 11%. Markit’s Eurozone Manufacturing Purchasing Manger’s Index (PMI) dropped to 45.1 in May from 45.9 in April; the lowest since June 2009. Many analysts are expecting China’s annual economic growth to fall by almost 8% in the second half of 2012. The very uneasy status of the European Union and a weakening Chinese economy played right into the hands of Gold market bulls, causing the yellow metal to rise in price almost $80.00 an ounce from the overnight lows.
The United States also had troublesome economic news that caused turmoil in the stock markets. In a report released Friday morning, just 69.000 new jobs were added in May 2012; the lowest number of new jobs created in over a year. Further, the unemployment rate in the U.S. ticked up .1% to 8.2%. The new jobs report came in less than have than anticipated by analysts. “There’s no positive spin that can be put on the May employment report” said Jim Baird, chief investment strategist at Plante Moran Financial Advisors. “It was a disappointment, pure and simple”. U.S. stocks fell sharply Friday, with all three major U.S. Indices trading down (NASDAQ, S&P, DJIA).
During global economic turbulence, the price of safe-haven investments such as Gold goes up. “Gold reacts beautifully, and with the best price action, on U.S. troubles, and this morning’s wonderfully wobbly jobs data did the trick,” said Richard Hastings, macro strategist at Global Hunter Securities. “Not only would there be more speculation about [a third round of quantitative easing].. but all of the data speak to tax revenue dilemmas due to growth limitations, and that means the U.S. budget comes back into focus,” he continued; “if this occurs, then gold could rally this summer.”
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