Gold prices didn't flinch Thursday when only 388,000 people filed for jobless claims in the week ended March 26th. The figure along with the ADP employment report Wednesday, which said that the private sector added 201,000 jobs in March, bodes well for Friday's jobs number.
"Gold does appear to be lagging the more industrial metals," says James Moore, research analyst at FastMarkets.com. The silver/gold ratio, as of today's close, is 38 which means silver is outpacing the yellow metal. "Reaction [today] is likely to be fairly muted as traders await tomorrow's key non-farm payrolls reading which will likely determine the next leg of direction for risk appetite."
Here's how the jobs number should play out for gold. A solid reading will increase risk appetite for stocks, decrease the need of buying gold as protection and raise the question of will the Federal Reserve alter its $600 billion bond buying program before it expires in June. The end of free money makes gold less appealing as a safe haven. A weaker reading, however, might ignite gold buying especially into a weekend, which has been a wild card for investors.
According to George Gero, senior vice president at RBC Capital Markets, gold was helped Thursday by short covering ahead of the jobs number. "It doesn't bode well to be short for Friday's reports and weekend headlines upcoming ... the mood is bullish."Oil prices also worked their way towards $107 a barrel. A spike in oil prices drums up inflation fears which makes gold and silver an attractive investment. Gold mining stocks, a risky but profitable way to buy gold, were mostly higher. Yamana Gold (KGC) was adding 0.65% to $12.42 while Eldorado Gold (EGO) flat at $16.25. Other gold stocks, Harmony Gold (HMY) and International Tower Hill (THM) were trading at $14.90 and $10.07, respectively. Randgold Resources (GOLD) is a stock to watch today after the company said reserves and resources rose by 5% in 2010 and better grade was also found at one if its mines. Average grade is higher than 4 grams per ton. Randgold is forecasting production increases and lower cash costs over the next five years. Randgold has hit snags recently as investors worried that civil unrest in the Ivory Coast would delay or stop production at its Tongon mine, which is set to produce 260,000 to 270,000 ounces of gold this year. Unlike some of its peers in the area, Randgold has reportedly not had to slow output. "It's a challenging environment that we have to work through," says CEO Mark Bristow. Bristow was hoping to lower cash costs to $600 an ounce, but as of the fourth quarter it cost $766 to mine an ounce of gold. Shares were soaring almost 11% to $81.63.
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