Gold price held firm near $1,638 per ounce

The gold price held firm near $1,638 per ounce closing this week despite the better than expected U.S. employment report. The spot price of gold climbed to as high as $1,665.20 in overnight trading and remained in positive territory after the release of the September non-farm payrolls report. Silver prices headed north alongside the gold price, advancing $0.59, or 1.8%, to $32.59 per ounce.

The September jobs report showed that non-farm payrolls increased by 103,000 in September, well above the 60,000 consensus estimate among economists. The unemployment rate remained at 9.1%, in-line with expectations. Despite the sell-off, gold futures posted a weekly gain of $13.50, or 0.8%. In doing so, gold snapped a four-week losing streak by posting its first weekly advance since August 29-September 2.

While the ECB did not cut rates yesterday, it did offer some respite by granting 1-year repurchase agreements. This easing of liquidity boosted market confidence and saw renewed interest across asset classes. The BoE extended its quantitative easing programme by £75bn. Gold and other precious metals have benefited. This is not surprising, given their close positive relationship with global liquidity and the threat that a drying up of liquidity would pose to all commodities, even precious metals.

Yesterday, there were reports that Vietnam’s central bank has allowed six institutions (including the Saigon Jewellery Co.—the country’s top gold trader) to re-open offshore gold trading accounts. Although the impact might be taken as bullish, if it should lead to a rise in gold imports into Vietnam, these are likely to be too little to prompt any significant price action. As alluded to the past few days, all eyes will be on today’s US non-farm payrolls data. Our G10 analyst sees a risk of a higher reading than expectations (consensus: 55k), but certainly not a particularly firm number. Consequently, long-term support for gold and silver from continued concerns over a possible US recession remains in place. In addition, Eurozone debt problems will also continue to remain a focus, and consequently benefit gold from a safe-haven demand perspective.