Gold Jumps Most Since April as Trades Take Long View on Rates

  • U.S. payrolls gain paves way for December Fed rate increase
  • `It may be many months before the next' rate rise: BMO

Gold traders are taking the long view, spurring enough optimism in the market to drive the biggest price gain since April and make miners some of the best performing stocks.

While a government report showing gains for U.S. jobs reinforced expectations that the Federal Reserve will raise interest rates this month, bullion investors saw past the headline numbers. The underemployment rate crept higher, reflecting a rise in the number working part-time for economic reasons, one of Fed Chair Janet Yellen’s favorite measures of labor-market slack. That spurred hope for gold bulls that the pace of tightening will be slow.

Gold hopefuls have been beaten down for most of the year, with prices touching a five-year low this week on the outlook for higher U.S. rates that cut the appeal of the metal because it doesn’t pay interest. Some traders are starting to speculate that the gain for borrowing costs is already factored into the market. Prices surged as much as 2.6 percent on Friday, the biggest intraday gain since April 27, while Newmont Mining Corp. was the biggest gainer on the Standard & Poor’s 500 Index.

“The market is now seriously considering what the Fed will do down the line, and seems convinced that once the December hike is out of the way it may be many months before the next one,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “The gold market its moving higher on that sentiment.”

Futures Prices

Gold futures for February delivery gained 2.2 percent to settle at $1,084.10 an ounce at 1:48 p.m. on the Comex in New York. Prices touched $1,045.40 on Dec. 3, the lowest since 2010. Newmont, the biggest U.S. gold producer, jumped 7.7 percent as the S&P 500 Index advanced 2.1 percent. Barrick Gold Corp., the world’s top producer, surged 6.6 percent in Toronto.

November’s 211,000 increase in payrolls followed a 298,000 gain in October that was bigger than previously estimated, a Labor Department report showed Friday. The median forecast called for a 200,000 advance. The jobless rate held at a more than seven-year low of 5 percent. Average hourly earnings at private employers slowed.

On Dec. 3, Yellen delivered a cautiously upbeat outlook for the U.S. economy, signaling the conditions necessary for an interest-rate increase have been met and that she hopes to tighten monetary policy slowly after liftoff.

“We have seen the jobs number is pretty good, and that means the Fed will increase interest rates, but Yellen is going to do it with a very dovish message,” Naeem Aslam, the chief market analyst at Avatrade Ltd. in Dublin, said by phone. “From a longer-term perspective, it is showing more upside for gold and that we’re close enough to a bottom for the precious metal.”

Silver futures for March delivery climbed 3.2 percent to $14.528 on the Comex, the biggest gain in two months. On the New York Mercantile Exchange, platinum futures for January delivery increased 3.9 percent to $880.60 an ounce, the biggest gain since June 2012, while palladium futures for March delivery jumped 5.6 percent to $566.85 an ounce.

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