Gold Prices Remain Volatile While Investors Wait for Jobs Numbers

 |  by Michael Locklear

October 2, 2012 – Gold prices increase slightly today over yesterday’s closing. Gold prices reached an annual peak yesterday when the price went up to $1791.20, its highest price since last November. The spot price today is around $1775. News of a stronger euro against the weakening dollar and a little market apprehension over forthcoming U. S. Job market numbers on Friday has investors in a bit of a cautious mood.

Analysts are waiting to see if their projections of job growth in the US will be borne out by the forthcoming labor market report scheduled for release on Friday. The expectation is that there will be an additional 113,000 nonfarm jobs added in September. This follows up on August report of job growth less than anticipated at only 96,000 added jobs.

Last month with the United States Federal Reserve announced its third round of monetary easing its primary focus was on improving the job numbers and the housing market. They announced that they would buy $40 billion worth of bonds each month until the economy showed solid improvement in both these areas. This action by the Fed is also intended to improve the flow of credit while keeping interest rates near zero for the foreseeable future.

Federal Reserve Chairman Ben Bernanke made clear in his remarks when he announced the Fed’s decision to institute QE3 that the duration of this new round of monetary easing was conditional on growth in the job market and housing sector. Over the last six weeks gold has seen a significant rally with prices going up near 10% fueled by speculation leading up to the Fed’s September announcements of its grave concern over the job market and its subsequent move toward a third round of financial stimulus.

Market analysts see the $1800 per ounce price for gold as a significant barrier. Activities in the market over the last two or three weeks would indicate that there is a significant resistance level at the $1800 mark. Market volatility has kept the price fluctuating between $1750 and just below $1800. It’s entirely possible that these fluctuations will continue into the near future.

The $1800 mark may remain a significant barrier at least until such time as analysts began to speculate on what the course of action the United States Congress will take that relationship is what is being referred to as the “fiscal cliff” . In a repeat of last year’s political infighting over raising the debt ceiling and a new element known as sequestering, this year’s fight is even more volatile. Credit rating agencies have already warned the United States that a failure to deal with this problem expeditiously will result in a further lowering of the credit rating for America. This fight has a strong potential to push gold to new heights. In the meanwhile we may continue to see volatility and fluctuations within the market as prices are pulled up and down by a multitude of economic and emotional drives.

Overall analysts still remain bullish on gold prices and most predict that the final outcome this year will be a spot price somewhere between $1800 and $2000 per ounce. Central banks are still moving to acquire more gold and gold exchange traded funds are continuing to increase their holdings, indications still remain strong that the Bulls are right and gold may be a long way from hitting the ceiling.

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