The latest United States job growth data released on June 1^st revealed that job growth in the world’s largest economy has slowed down considerably in the month of May. The report indicated that only 69,000 new jobs were added; well below the forecasted 158,000. Unemployment has also risen for the first time in a year to 8.2%. These data point to the fact that the U.S economic recovery has stalled and are worrying signs for investors who had found safe haven in U.S currencies and equities. Along with stock markets, hard commodity prices have fallen since the report with one notable exception, gold!

Gold prices opened at $1560 on Friday and closed at $1622 increasing by 4%. Throughout 2012, Gold prices have been falling despite a weak global economy. Typically, one would expect high demand for gold as investors look for safe havens. Despite signs of a shaky recovery, investor sentiments were biased towards a U.S recovery and thus invested heavily in U.S equities and currency. Friday’s report has disappointed investors and it is now almost clear that, like China, the U.S is also not immune to the crisis in the Euro Zone.

The sudden interest in Gold is likely to pick up trend if further data confirms that U.S growth has indeed stalled. Up till now, the Federal Reserve had been unwilling to intervene or change policies. However, the May job growth report and growing unemployment might convince the Federal Reserve to enact another round of quantitative easing. The argument for another round of quantitative easing is further strengthened given that the US Dollar has appreciated significantly against all currencies making U.S exports less completive.  Chinese Yuan has also depreciated and is trading at the lower threshold of the rates Bank of China sets. Thus, given the weak global data and uncertainties about Federal Reserve intervention, it is likely that Gold will once again start appealing as a good investment opportunity. 

Note: The blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.