Gold & Silver Daily Market Recap: April 12th, 2012

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Spot gold rallied on the heels of disappointing jobs data released this morning. The yellow metal finally broke the $1671 level to touch $1678.

There was talk of renewed QE3 hopes as disappointing job data spooked the market. The U.S dollar sold off aggressively in wake of the poor numbers. Claims for unemployment benefits rose by 13,000 to a 380,000 higher than what the street expected of 355,000, but still below the psychologically important 400,000 level. The release late yesterday of the Beige book; the report, which was prepared by the Federal Reserve Bank of Cleveland, is based on information collected on or before April 2. It summarizes comments received from business and other contacts outside the Fed and is not a commentary on the views of Federal Reserve officials; also added to the metals rally. The beige book release was very sombre.

“The economy continued to expand at a modest to moderate pace” the Beige Book said. Manufacturing was buoyed by significant gains in automotive and high-technology industries, while most companies expressed optimism about near-term growth prospects. However, many businesses were somewhat concerned about rising petroleum prices, the Fed report said. “Hiring was steady or showed a modest increase across many districts. Difficulty finding qualified workers, especially for high-skilled positions, was frequently reported. Upward pressure on wages was constrained. Overall price inflation was modest,” it added.

The market also reacted to comments of Vice chair Janet Yellen

“The US economy will continue to recover only gradually and labor market slack will remain substantial for a number of years to come, the risk that continued high unemployment could eventually lead to more-persistent structural problems underscores the case for maintaining a highly accommodative stance of monetary policy,” said Yellen, adding that further easing actions could be warranted if the recovery proceeds at a slower-than-expected pace.

Any hint of QE3 had traders’ fingers twitching to buy gold. The market was poised to rally and we saw today as the metal took out key levels of $1671 and $1675. Look for the metal to challenge $1697 next week. A close above $1700 changes the ball game and may draw fund interest back.

Spot silver showed resilience bouncing back to trade to $32.58, it’s highest since April 3rd. The Dow Jones Industrial average bouncing for the second straight day gave industrial metals a lift. The gold silver ratio drop lower to 51.60 as silver played a little catch up to gold. The dual role metal made a good run today closing above its 200 day moving average of $32.01. We should see prices bounce to $33.00, with $33.15 acting as resistance.

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