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Do weak economic figures suggest additional Fed monetary easing?

*Financial Times, by Emiko Terazono, September 2, 2011

”Bullion rose to $1,873.10, a high for the week, after the release of weaker than expected US non-farm payroll figures for August on Friday, and was trading about $1,865.84 per troy ounce, up 2.5 per cent, as investors took cover.

Crude oil, which was trading down in European morning trading, fell further, with ICE October Brent down $1.57 to $112.72 a barrel and Nymex October West Texas Intermediate down $1.89 to $87.05.

After a slew of economic data this week, investors had been awaiting the release of US employment data for August later Friday, while position adjustment ahead of the Labour Day weekend in America has also been affecting trading.

Analysts said the non-farm payrolls would be an important indicator of whether the US Federal Reserve Bank looks to ease monetary conditions.  A weak figure would signal weaker US growth, but point to further quantitative easing, a positive signal for gold.

However, whether the employment data will add momentum to the yellow metal, which has traded within range this week, remains to be seen.  Edel Tully, precious metals strategist at UBS, one of the leading bullion banks, said the US job numbers would have to diverge considerable for the gold price to move sharply: ‘Gold’s diminished sensitivity to data releases so far this week suggests it would take a very large departure from expectations for the metal to convincingly break out of its recent range.’

On the physical side, analysts and traders are looking to a few months of gold buying.  The end of Ramadan usually signals a period of strong gold buying in the Middle East.  This is followed by Indian buying linked to Diwali in October and then the Indian wedding season.”

*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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