Gold Waits For US Jobs Data

Gold recovered to above $1,600 yesterday as weaker than expected US manufacturing data disappointed hopes of a strong US recovery.

Gold’s safe-haven status was given a boost as North Korea continues to shout threats at both the US and South Korea. Further news of nuclear developments emerged this morning which should help support the gold price. Given the South Korean’s minimal response in the past to aggressive behaviour from the North, many expect greater retaliation.

This week I suspect gold will be hanging on for Friday’s US nonfarm payrolls report. Unemployment is expected to remain at 7.7% – key, as the FOMC’s 6.5% has become a huge focus for the committee and affects decisions over QE.

According to data released this morning, Eurozone unemployment is the highest it has ever been since 1999. Average unemployment across the 17 countries has increased from 11.9% in January to 12% in February. Whilst levels remain relatively low in countries such as Germany, unemployment levels of 26% in Spain and Greece push up the average – demonstrating the huge disparities between the members, of what should be, the single currency union.

News of increasing unemployment will no doubt weigh on the minds of the ECB, who are due to meet on Thursday. Given the downturn was already clear during the last meeting, prior to the Cyprus bail-in, it will be interesting to see how policymakers respond to this renewed worsening of the crisis.

Yesterday silver touched 8-month lows of $28, this was the fifth consecutive day of downward movements. The price was no doubt affected by weak manufacturing reports from the US. Poor data from China also did little to help the precious metal, whilst manufacturing picked up in March it wasn’t at the pace many had expected.

On Thursday, the Bank of England’s MPC will meet to decide on the latest monetary policy. This is the first meeting since the 2013 budget in which Chancellor George Osborne announced that the MPC had been given a new remit which “recognises that the monetary policy committee may need to use unconventional monetary instruments to support the economy while keeping inflation stable”.

Many are expecting a further £25bn in QE to be announced in this second-quarter, the chance of it happening this week seems to be fairly split.

Today is the first working day for the UK’s new faces of regulation. Rather than the FSA we now have the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The PRA will supervise around 1,700 banks, building societies, credit unions, insurers and investment firms. The FCA inherits the FSA’s watchdog role: keeping an eye on bad behaviour. The FCA will also have to power to ‘ban suspect products for up to 12-months while it assesses their suitability.’ Unsurprisingly, many have expressed concerns that this new power will stifle innovation.

This week will see Haruhiko Kuroda, Bank of Japan’s new governor, take the helm at his first policy meeting. Having already made his desire for more aggressive monetary stimulus clear analysts expected him to announce further purchases government bonds as he works to meet the country’s new inflation target of 2%.

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