Gold Rises on Dollar's Drop
Source: Bloomberg, Pham-Duy Nguyen (10/8/10)
"The jobs number reinforces expectations of quantitative easing."
The greenback fell to the lowest level against the yen since 1995 after a report showed the U.S. lost more jobs in September than economists estimated. Before today, gold climbed 22% this year, reaching a record $1,366 an ounce yesterday.
"The uptrend in gold continues because the dollar just continues to lose ground," said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. "There's more downside in the dollar. The jobs number just reinforces the fact that we'll see more quantitative easing."
Gold futures for December delivery rose $11.20, or 0.8%, to $1,346.20 at 12:21 p.m. on the Comex in New York. The price dropped 0.9% yesterday, the most since July 27.
U.S. employers cut staffing by 95,000 workers after a revised 57,000 decrease in August, the Labor Department said today. The median estimate of economists surveyed by Bloomberg News was a drop of 5,000. The unemployment rate held at 9.6%.
The Fed has kept the benchmark lending rate at zero% to 0.25% since December 2008 and purchased Treasuries and mortgage-backed securities to inject more cash into the economy and spur growth. Gold is headed for the 10th straight annual gain.
The metal may "exhibit a retrenchment in the near term," and fall to $1,300, said Tom Pawlicki, an analyst at MF Global Holdings Inc. in Chicago.
The 14-day relative-strength index, a gauge of price momentum, has been above 70 since Sept. 22, a signal that prices may decline. Gold reached a record in 14 sessions since Sept. 14.