Daily Gold Update

Source:Dana Samuelson, American Gold Exchange

AustinPrecious metals tumbled Friday due to a stronger-than-expected non-farm payroll report and reports that the Chinese central bank paused its gold accumulation in May. At the close of the New York session, gold fell $78.70 (3.3%) to $2300.20 per ounce, and silver plummeted $2.08 (6.6%) to $29.29 per ounce.

According to the Bureau of Labor and Statistics, 272,000 new jobs were created in May, surpassing all analyst expectations. Analysts had anticipated an average of 185,000 new jobs. Wages also surged, with hourly earnings increasing 0.4% from April and 4.1% year-on-year. The unexpectedly robust job creation virtually eliminated any chance of the Fed cutting the federal funds rate at their June meeting next week. This also led market participants to doubt the prospect of a rate cut in September. The yield on the 10-year Treasury jumped 13 basis points, and the dollar rose 78 basis points on the US Dollar Index following the strong jobs report. Higher yields and a stronger dollar typically pressure gold prices lower.

Additionally, it was reported this morning that there were no changes to Chinas official gold holdings in May. Central bank gold buying has been robust over the last two years, with China being one of the biggest buyers in the international marketplace. News that China paused its gold buying in May, in effect removing one of the biggest supports of the recent gold rally, amplified todays gold sell-off. Until May, China has added gold to their official holdings for 18 consecutive months. With gold recently setting new all-time highs, time will tell whether this pause is temporary or prolonged. The Chinese rate of purchase has steadily increased over their 18-month buying spree and, with it, so has the gold price.

Platinum and palladium also tumbled today, 3.9% and 2.1%, respectively.

At the New York spot close: August gold plunged $78.70 to $2,300.20; July silver plummeted $2.10 to $31.25; July platinum gave back $39.60, dropping to $972.00; and September palladium fell $19.60 to $918.00.