Comex gold futures surged Friday and soared to a bright three-week high following a very dismal U.S. jobs report.
The rally in gold came after the Labor Department reported employers added just 69,000 jobs in May, well below the anticipated 150,000. The data also pushed the unemployment level up a tick to 8.2% from 8.1%, stoking worries that the U.S. economy is still ailing and a recovery is far from certain.
The lackluster jobs report ignited hopes that a fresh round of quantitative easing may be in the near future. Gold prices climbed on the prospect.
Market participants returned to gold pushing the front month contract up some $59, nearly 3%, in early afternoon trading to $1,619.10 a troy ounce.
Silver rose in concert, gaining 96 cents to $28.67.
Trading was heavy and volatile in precious metals Friday, as traders moved quickly to cover short positions.
To date in 2012, gold has been experiencing its worst showing since the 2008 financial crisis. But the catalysts may be aligning to turn the trend upward.
"It's very likely that the economic data today and what's come out of Europe has convinced the market that there will be further government monetary stimulus," Robert Lutts, chief investment officer of Cabot Money Management, told Reuters. "Larger institutions will commit money to gold in ways they never had before."
Gold Surge is Welcome News
Often viewed as a safe haven, gold has lost some of its luster as the Eurozone debt crisis has deepened. Fearing the worst, jittery investors have sold everything, including gold, preferring to hold cash.
During the last year gold has been snarled in global fiscal miseries, James Steel, chief commodities analyst at HSBC Securities, told Fortune. Europe's ongoing economic melee has continued to weigh on gold and has pushed prices lower.
For those investors who still have a shine for gold, falling currencies like the euro have held many back. Gold is priced in U.S. dollars, so foreign investors who want the purchase the precious metal must first convert their currency to dollars. The euro has been under pressure, falling to record low levels in the past few months, while the dollar has strengthened, making gold more expensive to overseas investors who hold other currencies.
But the long-term picture for gold has always been bright.
As Fortune noted, U.S. lawmakers will attempt yet again to agree on a deficit reduction plan, or face trillions of dollars in looming tax hikes, causing spending cuts to immediately take hold.
The U.S. Budget Office has cautioned that the economy could contract by 1.3% during the first half of 2013. These concerns will pressure equities and other assets, thrusting investors into gold bullion.
Gold is destined to be knotted in the middle of the global debt debacles for the next several months. The ride may be bumpy, but it is increasingly looking more rewarding.
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