New York 06/07/2012 - Gold futures crumbled Friday following a US non-farm payroll report was disappointing enough to trigger a sell-off in equities and industrial commodities but wasn't so disastrous as to ignite a sustained rally by the QE3 bulls.
Gold for August delivery on the Comex division of the New York Mercantile Exchange closed down $30.50, or 1.9 percent, at $1578.90 an ounce. Trade was particularly volatile early in the session with the yellow-metal racing up to $1,610 minutes after the job numbers were released but then quickly reversing back towards $1,575 as the mood soured.
The US work force added just 80,000 jobs in June, below the forecast of 97,000. The unemployment rate remained static at 8.2 percent, the Labor Department said.
“Apparently a softer than expected US jobs report failed to rekindle US easing hopes and instead gold and other metals markets remained under pressure in the face of an extension of the initial risk-off setup,” the CME Group said in a market commentary.
Many traders have already taken long positions gold in anticipation that the Fed will eventually launch additional quantitative easing (QE3). Stimulus from the US central bank is seen as unequivocally supportive of gold because extra liquidity tends to debase the dollar and create future inflationary risks.
“For some reason the markets were unwilling to play up the prospect of US easing, perhaps because the US Payrolls weren't indicative of severe slowing,” CME added.
The weak jobs data gave precious traders a "classic non-farm payrolls bloodbath day" where stops were filled at the highs and lows of the day before succumbing to the general medium- and short-term direction lower, said London-based broker Triland Metals, which added that since February 29 gold has continued to set lower highs as in a wedge towards the key $1,530 pivot.
“The QE3 bid that comes from bad US data is becoming less and less patient with rallies continuing to be sold. The sharp spike on the jobs figures took gold right up to technical 61.8 percent resistance at $1,610.60, the retracement of the fall from the $1,625 high this week,” Triland said.
In the US markets, the Dow Jones industrial average and S&P 500 were both down 1.40 percent, while light sweet crude (WTI) oil futures were $2.44 lower at $84.78 per barrel. Comex copper also got hammered, ending down 8.35 cents, or 2.4 percent, at $3.4095 per pound.
Another major factor in the retreat was the euro, which broke sharply lower to a two-year low of 1.2258 against the dollar. In European markets, Germany's DAX and France's CAC-40 ended down 1.92 percent and 1.88 percent respectively.
“The rumour mill from the eurozone into the end of the week has turned decidedly negative, with rumours once again hinting at some EU members leaving the union,” CME said in reference to Finnish Finance Minister Jutta Urpilainen's threat to leave the euro rather than pay down the debts of other countries in the region.
As for the other precious metals, Comex silver for September delivery settled down 75.2 cents at $26.920 an ounce. Trade ranged from $26.940 to $27.795.
Platinum futures for October delivery on the Nymex was down $33.10 at $1,444.60 an ounce, while the most-actively traded palladium contract was at $577.10 an ounce, down $8.65.