A very decent job report for the month of January has crushed the gold price last Friday as the yellow metal lost more than $30 per ounce, sending it back to the lowest level in more than a month. Even though there was some support around the $1250 level, we fell right through it on the back of an allegedly good jobs report.
According to the official numbers, approximately 257,000 jobs were created in January but the attention was mainly drawn towards the upwards revision of the November and December numbers, where an additional 147,000 jobs were estimated to have been created. This had a major consequence as it meant that in 2014, more new job were created than any time in the previous 14 years. Theoretically, this sounds great, but the ‘number of jobs added’ does not necessarily improve the quality of life.
And indeed, the hourly salaries were still trending down until last December with a small bounce noticeable in January, but that’s absolutely not enough to get excited again, especially as the growth rate of the economy already seems to be slowing down again, and the expensive dollar will definitely hurt the trade balance of the USA as the total value of exported goods will very likely go down.
Additionally, now the oil price is still at extremely low levels, the total amount of onshore drill rigs in the USA is declining at a rapid pace and we wouldn’t be surprised to see the American economy losing jobs over the next few months which could make the Fed postpone its expected rate hike once again.
The appetite for gold in the Far East remains very strong as specialized website Bullionstar.com estimates another 255 tonnes (!) of gold were withdrawn which indicates January 2015 saw the strongest demand for gold ever in that region. This actually says a lot. Even though the gold price increased throughout the month of January the demand continued to increase as well and that’s quite remarkable.
It’s not just in Asia the demand is picking up, we are positively surprised by the demand for gold and silver American Eagles. In January, the US Mint sold 81,000 ounces of gold and in excess of 5.5 million ounces of silver. That’s massive and almost as much as the two previous months COMBINED! The gold demand was the highest since January last year and the demand for silver eagles almost broke the record of October last year when the Mint ran out of silver…
There’s zero doubt the deep pockets in Asia will be grateful for the most recent drop in the gold price and even in the West people and central banks are starting to wake up. As you all know, the Netherlands have already repatriated a large chunk of their New York-stored gold and Germany has also accelerated their repatriation schedule. The country brought 120 tonnes of gold back home of which 85 tonnes were shipped from the vault of the NY Fed. And this results in another question.
If Central Banks continue to publicly state that gold doesn’t have monetary value and that the total amount of gold it has on the balance sheet is irrelevant, why are they all so keen to bring their gold back home?
The retail demand for gold and silver is going up, as evidenced by the official production numbers of the US Mint and it looks like more people are getting prepared or the coming Apocalypse.
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