US Payroll Data Upsets Gold, India Restricts Gold Purchases

This afternoon US non-farm payrolls data was released, overshooting estimates of +144,000 and coming in at +165,000. The labour participation rate, however, remains at a 63.3% its lowest since 1979, whilst the average work week for employees on private nonfarm payrolls decreased by 0.2 hour.

As a result of the better-than-expected news the dollar shot up and gold fell down. Given past falls in the gold price, this one was just a little trip and it has already begun to recover. After last month we wonder how many are really paying attention to such economic data releases.

Prior to the US non-farm payroll data release gold was set to finish the week with a second-weekly gain, although this seemed tentative given the on-going outflows of ETFs as some were unsure of gold’s climb towards $1,500.

Will the teeny fall in the gold price stimulate more demand in order to drive gold to $1500/oz? Well, it will certainly see more buying but we suspect the spot price (now, really just the price of paper gold) will experience further declines before reaching new highs.

The markets will have a lot to digest after this week. Two central bank meetings- the ECB and FOMC of the Fed both reiterated their commitment to easy-money. Draghi confirmed that he would consider negative interest rates, whilst the Fed gave no indication of when the ‘temporary’ monthly bond purchases would stop.

India restricts gold buying

Physical demand in India has continued to pick up thanks to low prices combined with the key festival of Akashaya Tritiya. For some jewellers they were looking for even lower prices, perhaps after today’s data they may have their wish.

Elsewhere in India the government continue to look to reduce physical gold imports in order to curb domestic demand as an attempt to reduce the large current-account deficit. According to Bloomberg, the Reserve Bank of India said in their monthly statement that ‘banks will be allowed to import bullion on a consignment basis to meet only genuine needs of exporters of gold jewelry.’

Last year gold imports in India dropped by 11% in 2012 to 860 tons from a record 969 tons in 2011, this year may see yet another decline but we suspect the loss of gold will be matched in the black-market.

Arizona says no to sound money
Last night, in a blow to the sound money movement, Arizona’s Governor Jan Brewer vetoed a bill which would have seen gold and silver become legal tender. In our Real Asset Report, last month, we outlined which states are looking to pass similar bills and yesterday we outlined five reasons why a US state would want to return to sound money.

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