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Gold forecast for strong week after poor US data

 Gold is forecast to have a strong week on the markets following the publication of weak jobs data in the US, which makes it less likely that the US Federal Reserve will increase interest rates.

The precious metal jumped in value by more than two per cent on Friday following a weakening last week on the back of expectations that the Fed was on course to put up the cost of borrowing. But the latest US Labor Department figures for non-farm jobs showed the lowest number of jobs in five years were created during May and appear to have put paid to most analysts’ predictions of a hike in rates.

The data was well down on expectations and could spell a further resurgence in gold prices over the week ahead, following a slump as investors confidently expected the Fed to raise rates. Gold was valued at £857.31 per troy ounce at 20.45 on Friday (3 June) and this morning (Monday 6 June), it was valued at £859.63 per troy ounce at 08:00.

ABN Amro analyst Georgette Boele told Reuters: “The sharp drop in non-farm payrolls is negative for the dollar and positive for gold. Expectations for a rate hike soon have clearly diminished... Precious metals prices will fly higher.”

After the release of the jobs figures, both US and European shares fell, along with the US dollar, oil and bond yields. Gold tends to rise in such circumstances because it is considered a safe haven for investors during turbulent economic times.

James Steel, chief metals analyst for HSBC Securities in New York, said: “The climate for gold to go higher ... was certainly set because this pretty sharp drop in bond yields, along with the pull-back in the US dollar and declining equities created a good combination for the gold market to go higher.”

Silver, platinum and palladium also rose on the news.

Article Last Updated: Monday, June 6, 2016