Another weak unemployment report in the United States has helped gold on 4/27/2012. The price gold rose to $1659 per ounce. Un-employment claims were virtually unchanged from the previous week. While the economy in the United States is growing it is hardly robust, and has not been strong enough to spur new hiring.
The FED also announced that interest rates would remain low. Gold tends to like low interest rates because it spurs investment in the metal. In addition, Central Banks continue to buy gold at a fast pace. Investors should follow this lead because banks are buying gold to further insulate themselves from the debt crisis in Europe, especially now that Great Britain and Spain have officially dipped into recession.
There is enough bad economic news in the US and abroad to keep the gold spot price high and stable. The strong dollar against the weakened Euro has stopped gold from soaring, but other economic factors have been able to keep gold stable and strong. The current fear in Europe is that Spain might need to be bailed out by its EU partners much like Greece was. Spain’s government is doing all it can to avoid that, because doing so means they will lose much of their financial freedom.
However, it is likely that Spain will need some help soon from the EU. Especially troubling in Spain is their high un-employment rate which is over 22 percent. During the Great Depression the United States hit 25 percent un-employment. This gives an indication of just how serious the situation in Spain is.
Although Great Britain has hit recession their economy is in better shape than Spain’s, and they will likely be out of recession sooner versus later. However, this news keeps gold high. Investors should still keep their eyes on Europe. China’s most recent manufacturing numbers showed that sector continues to grow, although at a slower pace. China’s is working hard to ensure their economy makes a soft and not a hard landing as their economic growth slows.
In the end the continued weakness in the American job market along with continuing problems in Europe have kept gold steady and high, despite the stronger dollar. The FED recently helped gold by announcing they will continue to keep interest rates low. Gold performs better when interest rates are low because investors are reluctant to buy into low return investments, and therefore turn to gold.