Posted By Isaac Nuriani
As I’ve pointed out on numerous occasions, gold prices ebb and flow over the short term as economic conditions fluctuate. Right now, gold is achieving a 3-week high because the current economic news is pretty grim. You see, the latest Labor Department report shows that May employment was up by a shockingly anemic 38,000 jobs. That’s way below the expected increase of 160,000 jobs, and it means that the bloom’s off this rose.
Not that I am that surprised. I’m pretty skeptical when it comes to economic numbers announced by the government. You can bet that this current report is not something they wanted to announce, but sometimes you just can’t sugarcoat the truth. And the current truth is that people are finally getting hip to the weak global economy. China is still looking like a basket case, commodity prices are still weak with the temporary exception of oil, and I expect that oil prices will come down again as mothballed rigs come back online.
Now, the weak job numbers caused the Federal Reserve to slam on the brakes hard. It had been spouting off how it’s going to raise interest rates soon to slow down an overheating economy. Give me a break! Those Washington worthies are now cleaning the egg off their faces as they backtrack on all those brave pronouncements, meaning that we’re likely not going to see a hike in interest rates anytime soon. That’s good for gold, because low-interest bonds don’t compete well against gold and the other precious metals. The longer interest rates stay depressed, the higher the price potential for gold.
The precious metal is above $1,262 per ounce, the highest it’s been since May 18. The Fed’s next opportunity to raise interest rates is later this month, and I don’t believe that will happen. Instead, I think gold will benefit and the U.S. dollar will weaken – that’s what the dollar does when rates and growth are falling.
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