Oil And Gold Analysis: Crude Oil Moves Higher, Gold Futures Up

CL
Crude oil futures moved off the previous session’s eight-month low to end up more than 1% on Friday, after weaker-than-expected U.S. jobs data fanned speculation that the Federal Reserve will scale down its bond-buying program at a slower pace than previously anticipated. The unemployment rate fell to a five-year low of 6.7% from 7% in November, but this was due in part to people dropping out of the labor force. The labor participation rate fell to an almost 35-year low of 62.8%. The disappointing data tempered expectations that the Fed would cut its stimulus program again this month. The central bank cited a stronger labor market in its decision to taper its asset purchase program by USD10 billion in December to USD75 billion-a-month. Minutes of the Fed’s December meeting released earlier in the week showed that officials were keen to stress that further reductions in stimulus were not on a “preset course” and would be undertaken in “measured” steps. The central bank is scheduled to meet January 28-29 to review the economy and assess policy. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, declined 0.41% on Friday to end at 80.74, the lowest since January 2.

GOLD
Gold futures shot up on Friday after data revealed the U.S. economy added far fewer payrolls in December than expected, which fanned expectations for the Federal Reserve to scale down its bond-buying program at a slower pace than once anticipated. The Bureau of Labor Statistics reported earlier that the U.S. economy added 74,000 jobs in December, well below expectations for a 196,000 increase and below an upwardly revised 241,000 rise the previous month. The U.S. private sector added 87,000 jobs last month, disappointing expectations for 195,000 rise, after an upwardly increase of 226,000 in November. The report also showed that the U.S. unemployment rate fell to 6.7% in December due to a weak participation rate, down from 7.0% in November. Analysts had expected the rate to remain unchanged last month. The numbers weakened the dollar by fueling expectations for the Federal Reserve to trim its USD75 billion monthly bond-buying program at a slower pace than once expected. Fed asset purchases tend to weaken the dollar by suppressing long-term interest rates, thus making gold an attractive hedge as long as monetary stimulus programs remain in place.