Gold Price Rallies On Weak US Jobs Data: April 9, 2012

The gold price rallied on Friday, following news of disappointing jobs gains in America during March. Economists had forecast a gain of 205,000 nonfarm payroll jobs, but the actual figure was only 120,000. Combined with rising concerns about the Spanish economy – yields on Spanish government bonds now stand at 5.61%, up from 4.9% a month ago – and it’s little wonder that gold has recovered from the oversold state it reached last week below $1,620; the price now just north of $1,640 as of 10.30BST.

The catalyst for this up move in the gold price is of course the thought that these lacklustre US jobs numbers raise the chances of further stimulus from the Federal Reserve. In the words of Michael Gayed of New York-based Pension Partners LLC: “There’s going to be this feeling that the Fed’s minutes that said easing was off the table is not going to pan out… We’re getting the consistent message that stimulus is good for gold.”

This “will they, won’t they” speculation about Fed QE is getting irksome to say the least. It seems distasteful that the direction of supposedly-free asset markets around the world seems to hinge more-or-less entirely now on whether or not the world’s central banks – chief among them, the Fed – pump ever-increasing amounts of new currency into the banking system or not. A few classical economists must be rolling in their graves.

But whatever one’s political and economic inclinations happen to be, one must deal with the world as it is. And as the Telegraph’s Ambrose Evans-Pritchard notes, the bullish case for buying gold remains intact – despite much bearish speculation to the contrary in recent weeks. No amount of wishful thinking can disguise the dire fiscal states of western governments, or the slow death of the dollar’s reserve currency status.