SPOT MARKET gold prices spiked 0.5% to $1661 an ounce – within
1% of this week's high – immediately following news of
better-than-expected US jobs data on Friday. The gold price did however
hand back all its gains within half an hour.
Stock markets and industrial commodities also rallied on the release
of US nonfarm payrolls, which showed 103,000 nonagricultural jobs were
created last month. Last month's report showed no jobs were added in August
– though this has now been revised up to 57,000.
"[However,] long-term support for gold and silver from continued
concerns over a possible US recession remains in place," reckons Marc
Ground, commodities strategist at Standard Bank.
"In addition, Eurozone debt problems will also continue to
remain a focus, and consequently benefit precious metals."
Going into the weekend, gold prices are up more than 1.5% and
heading for their first weekly gain in five weeks.
Silver prices also spiked following the nonfarms
release, before they too fell, dropping back towards $32 per ounce for a
weekly gain so far of around 6.7%.
"Gold and silver are our top commodity picks heading into
2012," says a report from Morgan Stanley out today.
"Gold, and silver to a much lesser extent, are
viewed as safe havens and store of value as well as the closest thing to a
global reserve currency."
The British government fears it may have to pump more money into
Royal Bank of Scotland – which received the world's largest bailout
three years ago at £45 billion – as part of a Europe-wide move
to recapitalize the banking sector, according to a front page story in
today's Financial Times.
RBS has sought to play down the story, telling news agency Reuters
that its exposures to Greek debt "are modest relative to core Tier 1
Ratings agency Moody's meantime announced Friday it has downgraded
RBS by two notches from Aa3 to A2. Moody's has also downgraded another
eleven UK financial institutions, including Lloyds TSB, Santander UK,
Co-Operative Bank and Nationwide Building Society.
"The downgrades do not reflect a
deterioration in the financial strength of the banking system or
that of the government," said a Moody's statement.
"The right thing at present is to create some more money to
inject into the economy," said Bank of England governor Mervyn King yesterday, following the Bank's decision to
expand its quantitative easing program by £75 billion.
"This is the most serious financial crisis we've seen at least
since the 1930s, if not ever."
Over in Europe, the process of approving the EU agreement of July 21
– which includes granting the European Financial Stability Facility
powers to recapitalize banks – goes on.
The Netherlands yesterday approved the agreement, while in Slovakia
meantime the Freedom and Solidarity party has tabled a compromise proposal
to its three ruling coalition partners that a committee be set up to decide
how EFSF funds would be used in the country.
The European Central Bank's Governing Council meantime "does
not consider it would be appropriate that the central bank would leverage
the EFSF," outgoing ECB president Jean-Claude Trichet
The central bank did say it will launch a new €40 billion
asset purchase program. The program will target covered bonds – debt
back by the cash flow of underlying investments, adding further details
will emerge next month.
The ECB resisted calls for an interest rate cut, leaving its rate at
"But [Trichet] did do what was
necessary to avoid a counter-productive market response," notes the
FT's Lex column.
""By shifting the ECB's language to say that policy was no
longer 'accommodative', he made it easier for his successor, Mario Draghi, to cut."
"There has been a recent shift in central banking across the
world," adds Gerard Lyons, chief economist at Standard Chartered Bank
"In the West toward easing and in emerging markets putting
tightening on hold with an option to ease if necessary."
In New York, meantime, the Occupy Wall Street protest – which
has seen demonstrations against US banking sector bailouts – nears
the end of its third week.