Spot gold price on the bear wagon

US initial jobless matches expectations at 340,000

The XAU/USD’s daily candle yesterday opened at 1343.30 and closed at 1338.43, with the price losing 0.50 percent. Initially the price increased to a high of 1359.45, in an attempt to test Monday’s high of 1361.70, but failed to get there and started to depreciate. The fall accelerated sharply on release of the Federal Open Market Committee’s Statement on its monetary policy. The FOMC saw general improvement in the US economy but housing and labour markets weren’t up to scratch, tapering-wise. Housing market growth has been slowing in recent months and unemployment remains stubbornly above the 6.5 percent target. Factor in inflation staying under the two percent target and the policy-makers decided to hold the Quantitative Easing programme at its current pace of at $85 billion per month and not raise the Federal Funds Rate, which thus remains at its lowest level since late 2008. The decision met market expectations but the statement was seen as more hawkish vis a vis a start to tapering, against expectations for language suggesting a longer-term postponement. In the words of the Statement, the FOMC ‘decided to await more evidence that progress will be sustained before adjusting the pace of its purchases’, which could be interpreted as signalling that tapering may yet begin before the end of this year. Following the Statement’s release, the US dollar strengthened and the XAU/USD dropped by two percent. Some observers see the fall as profit-taking on the 11 percent rise from the 15 October low of 1251.54 to the 28 high of 1361.70.

In today’s trading so far, the decline in the XAU/USD has continued, reaching an intraday low at 1322.61 – the lowest point since 22 October. The ongoing intraday high is at 1341.95. At the moment the price is trading at 1328.00, one percent below the opening price level. The World Gold Council today released its Responsible Gold Mining and Value Distribution report, covering 15 enterprises operating in 28 countries and showing that in 2012 gold-mining companies spent $55.6 billion in aggregate. Of that total, $35.2 billion went to suppliers, wages totalled $8.3 billion, $8.4 billion went into government coffers as tax and the remaining $3.4 billion went in servicing provided capital. The report also showed that 80% of expenditures occurred in a mine’s host country.

US Unemployment Insurance Initial Claims fell by 10,000 to 340,000 last week, within the margin of error for the expected 339,000 and marking a third straight week of falls. First-time applications for unemployment assistance rose at the beginning of the month, mainly due to problems with system update in California and the impact in the private sector of the federal government shutdown. Once those factors had worked through, the indicator slowly began to fall. Despite the fall in initial jobless claims, the overall employment situation in the US remains unstable. New non-farm jobs increased by only 148,000 in September and the unemployment rate remains historically high at 7.2 percent. The October Chicago PMI is due out at 13.45 UTC today and is expected to drop to 55.1 points from the prior 55.7.

by Alexander Slavchev