Gold Price Falls on Strong Jobs Data

GOLD PRICE NEWS – The gold price fell $9.00 to $1,423.10 per ounce Friday morning following a strong employment report from the U.S. Labor Department.  After trading near unchanged ahead of the March jobs data, the price of gold sank on the news that 216,000 nonfarm payrolls were added and the unemployment rate dipped to 8.8%.  The U.S. dollar rallied on the news against the euro, helping to pressure both gold and silver.  Silver prices dropped 1% to $37.34 per ounce.

Calls for interest rate hikes from the Fed will surely follow this better than expected employment report, a development that could help to pressure gold prices in coming weeks.  The gold price rallied $9.60 to $1,432.52 yesterday to post its 10^th straight quarterly gain.  Gold posted a modest 1.3% gain in the first three months of 2011 and rose for the seventh month in the past eight.  This past quarter, the gold price was boosted by a wave of global unrest in the Middle East and North Africa, the earthquake and nuclear crisis in Japan, and the ongoing sovereign debt crisis in Europe.

However, the chief tailwind for the appreciation in the gold price was once again the Federal Reserve’s quantitative easing (QE) campaign.  The program’s second round, QE2, is scheduled to end on June 30 and debate has heated up over whether QE3 should be implemented.  While a small group of Fed presidents have argued against QE3, Chairman Bernanke and the majority of the FOMC have maintained their dovish stance.

Never shy to weigh in on the global economy or the gold price is Marc Faber, editor of The Gloom, Boom & Doom Report.  In a Bloomberg interview, Faber predicted that the Fed will “for sure” engage in QE3, “but not right away.”  The prominent investor and market pundit also reiterated his bullish outlook on the gold price and once again strongly criticized the monetary policies of the Fed and other central banks.

When asked for his forecast on further quantitative easing, Faber responded that “I believe Mr. Bernanke will keep on printing money…My view is they will do QE3, QE4, QE5 until QE26, until the whole system breaks down.”

While Faber is prone to hyperbole in certain instances, his rationale for many more rounds of QE is that it will be very difficult for the Fed to reign in the unprecedented level of easy monetary policies implemented since 2007.  Furthermore, he predicted that each new round of QE will have a smaller marginal impact, such that each additional dose of liquidity will have to be substantially larger than the previous to have the same impact.

“Printing money is destructive for the U.S. economy,” Faber continued, because it debases the currency and lowers a nation’s standard of living.  While it may provide a temporary boost to economic activity, history shows that it does not lead to sustainable growth.  It also “creates a mispricing of goods and services,” which are currently being reflected across financial markets.  “Each time I see Mr. Bernanke, and each time Mr. Geithner opens his mouth, I want to buy more gold and silver,” he stated.

As for the recent action in the gold price, Faber asserted that the ascent to a new all-time high of $1,447.75 “is not a clean breakout in my opinion, technically, and maybe a correction will follow.”  If the gold price does retreat though, he said he would be “happy” to add to his gold holdings.

(Source: http://www.goldalert.com/gold-price-falls-on-strong-jobs-data/)