Bears wrong-footed by jobs report light fire under gold price

On Friday gold raced higher after a so-so jobs report in the US injected some doubts about the bearish case for the metal.

The number of US non-farm positions created in November came in at 211,000, down significantly from October's nearly 300,000 jobs. The unemployment rate held at 5%, reflecting continued weakness in labour participation rates.

The slowing growth in employment won't dent expectations that the US Federal Reserve would hike rates in December, but it was enough for gold bulls to take heart and send the metal 2.6% higher shortly after the announcement.

Gold futures with February delivery dates on the Comex market in New York hit a high of $1,088.85 early with contracts worth more than 19 million ounces exchanging hands, almost double usual volumes.

That lifted gold to its highest level since November 10. The metal was holding onto most of those gains in afternoon trade at $1,084.40 an ounce, up $23.20 compared to yesterday's close.

High trading volumes also pointed to short-covering given that large-scale futures investors such as hedge funds have positioned themselves for continued weakness in the price.

Managed money dumped nearly 140,000 lots or the equivalent of just under 400 tonnes of gold on New York futures markets in the space of just four weeks.

That pushed overall positioning into the largest net short position – bets that gold will be cheaper in future – since government began tracking the data in 2006.

Image by artemuestra

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