2011-07-08

Gold price traded firm Friday morning following the news that the European Central Bank raised interest rates by 25 basis points to 1.5%

The gold price traded firm Friday morning following the news that the European Central Bank raised interest rates by 25 basis points to 1.5% – the highest level since March 2009. While the price of gold was unmoved by the ECB, news from ADP Employer Services that payrolls rose by 157,000 in June weighed on the Gold. Gold fell $2.40 to $1,526.60 per ounce while the more cyclically-sensitive silver price gained $0.23 to $36.12 per ounce. Stock prices surged on the strong employment data, rising 9.80 to 1345.60.

Weak data on the labor market has been a key rationale for the zero interest policy of the U.S. Federal Reserve. If tomorrow’s jobs report from the Labor Department exceeds expectations, markets could begin to price in hikes in the Fed Funds rate – a development that would likely weigh on gold prices.

With the price of gold and silver resuming their upward march this week, one of the foremost precious metals investors was back at it presenting his bullish case for the sector. Eric Sprott, founder of Sprott Asset Management, discussed his latest precious metals outlook in an interview on ChrisMartenson.com. The hedge fund magnate began by noting that the price of gold and silver have been “aided and abetted” by a plethora of government policies over the past decade – including “QE1, QE2, and the various printing mechanisms of the ECB and the Japanese government.”

Sprott went on to say that “If we ever have QE3 announced, I think gold and silver will just go absolutely bonkers here. And so I just think you have got to step in there and own it; we’ve had these fears all the way along. You know, $400, and $500 and $700 and $800 dollar gold, everyone was afraid it was a one-time thing. I don’t think it is a one-time thing, I think it is a secular thing. It’s going to carry on for quite a while here until we find some resolution of these problems.”

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