Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.6% after the April U.S. non-farm payrolls report came in much lower than expected, signaling a deeper slowdown in the economy. After months of trading like a traditional commodity, correlating positively with equities and negatively with the dollar, gold reversed that trend today and resumed its safe haven role as investors fled risk. The dollar and U.S. Treasury bonds also gained while oil tumbled nearly 4% and the S&P 500 plummeted 1.6%, capping its worst week of the year. Silver rallied 1.4% and platinum picked up 0.2% while palladium declined 1.4%.

At the close: June gold rose $10.40 to $1,645.20; July silver gained 42 cents to $30.43; July platinum added $2.90 to $1,536; and June palladium for June lost $9.20 to $652.15 an ounce.

The April non-farms payrolls report was terrible. A meager 115,000 jobs were added, the smallest gain in six months, whereas at least 160,000 were expected�and even that number would have been too few to support the recovery. Paradoxically, despite this poor showing, the official unemployment rate dropped to a three-year low of 8.1%�but only because another 522,000 people dropped out of the workforce, according to Zero Hedge, bringing the total to nearly 88.5 million nonworking Americans, the most ever.

Fed Chair Ben Bernanke has pinned the prospects of a third round of quantitative easing (QE3) on "incoming data," naming jobs as the most important ingredient in the recovery. Today's dismal employment news boosted gold not simply as a flight to quality in the face of severe economic uncertainty, but because investors believe it increases the likelihood of QE3. Gold surged more than 85% during the first two rounds of QE, from December 2008 until June 2011, and receded over the past two months when another round seemed unlikely. With two consecutive months of lousy employment data on the table, the odds of QE3 appear to be improving and gold is beginning to benefit.