2012-04-02

Gold price showed a muted reaction to the latest U.S. economic data

The gold price held firm on Friday amid weakness in the U.S. dollar and after a mixed bag of data on the U.S. economy.  The price of gold climbed to $1,671.34 closing for last week, but subsequently pared its gains to trade up by just $1.61 at $1,662.60 per ounce.

The gold price showed a muted reaction to the latest U.S. economic data on Thursday.  Weekly jobless claims fell to a fresh four-year low of 359,000, but still came in above the 350,000 median estimate among economists.  In addition, fourth quarter 2011 GDP remained at 3.0%, while economists were expecting the rate to be revised upward to 3.2%.

Analysts at VTM Capital attributed the recent weakness in the gold price to its relationship with the broader markets.  In a note to clients, the firm wrote that “We have suspected that it would take much more than a pure dollar correction for sustained gains to $1,700 and beyond, especially now that bullion is strongly correlated to the broader equity market, and risk sentiment in general.  It comes as little surprise, with the VIX volatility index – the global risk gauge – rallying to 2.5-week highs, that gold followed other precious metals with the broader market back in risk averse mode.”

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