Gold futures score biggest gain since August
SAN FRANCISCO (MarketWatch) -- Gold futures rallied almost 4% Friday, scoring their largest single-session increase since August and finishing the week higher as disappointing U.S. payrolls data raised the likelihood of a fresh round of quantitative easing.
Gold for August delivery (GCQ2) climbed $57.90, or 3.7%, to settle at $1,622.10 an ounce on the Comex division of the New York Mercantile Exchange. That marked the biggest single-session percentage and point gain for a most-active contract since August 2011, according to data from FactSet Research.
For the week, futures prices were 3.4% higher, based on a closing basis for the most-active contract.
"The stalled out job growth keeps hope alive for further quantitative easing by the Federal Reserve in the near term or at a minimum, will stifle talk of the Federal Reserve going in the other direction as [has] been mentioned in recent days," said Jeffrey Wright, a senior research analyst at Global Hunter Securities.
The U.S. added just 69,000 jobs in May, the smallest net increase in nonfarm payrolls in a year, the government reported. Economists surveyed by MarketWatch expected a 165,000 increase.
Growth figures in payrolls were also revised lower for April and March.
May's unemployment rate, meanwhile, rose to 8.2% from 8.1%, mainly because more people entered the labor force. Read more on the jobs data.
Following the "wonderfully wobbly" jobs data, "not only would there be more speculation about [a third round of quantitative easing] ... but all of the data speak to tax revenue dilemmas due to growth limitations, and this means the U.S. budget comes back into focus," said Richard Hastings, macro strategist at Global Hunter Securities. "If this occurs, then gold could rally this summer. If neither occurs, then gold would remain under pressure due to the return of deflation."
Silver futures followed gold higher, with July silver (SIN2) tacking on 76 cents, or 2.7%, to close at $28.51 an ounce -- around 0.4% higher than its closing price last Friday.
Separately, the Institute for Supply Management reported Friday that conditions for the nation's manufacturers slipped in May, with the ISM index falling to 53.5% from 54.8% in April. Read more on ISM.
And over in China, rival surveys of manufacturing activity for May pointed to deteriorating conditions. Read more on China manufacturing.
"Two months of disappointing jobs numbers implies a trend," said Brien Lundin, editor of Gold Newsletter. "Two months of numbers this horrendous screams that a significant downturn is underway, and puts the QE3 theme front and center."
"The speculators are starting to salivate over the next round of quantitative easing that will be served up to the markets," he said. "Gold has been the first to react to this prospect."
The next speech by a Fed governor will likely feature "some massaging of the message to recognize the ongoing weakness in employment and open the door to another round of money creation," said Lundin.
Investors would then "seize upon this confirmation to move en masse into the QE trade, sending gold higher and sparking a rebound in other commodities, as well as the U.S. equity market in general," he said.
Gold futures ended down 0.1% in regular New York trading on Thursday and lost 6% during May.
But the disappointing jobs data "could be the first sign of a shift in gold back to safe-haven territory," said Austin Kiddle, a director at London-based bullion brokers Sharps Pixley. Read Commodities Corner on gold's identity crisis.
In other metals trading Friday, the weak economic data pressured prices for copper, sending the July contract (HGN2) lower by 5 cents, or 1.6%, to settle at $3.31 per pound. It's down 4.1% from last week's close.
July platinum futures (PLN2) rose $15.60, or 1.1%, to $1,433.20 an ounce, up 0.5% from a week ago. September palladium ended at $614 an ounce, up 10 cents for the session and up 4.1% from last Friday's June contract settlement.
Mining stocks fared well Friday, with the Philadelphia Gold & Silver index (XAU) closing 5.8% higher.
Among the mining shares,
The SPDR Gold Trust (GLD) rallied along with gold, adding 3.9%. It's posted declines in five out of the previous seven sessions.