Gold Edges Higher Amid Disappointing Employment Data

Gold prices are edging higher as the release of disappointing August employment data on Friday eased fears about increasing interest rates.Since gold is non asset-yielding and costs money to hold, it is considered a poorer investment when interest rates are rising.

Most investors expect that the Federal Reserve will tighten monetary policy around the middle of next year, but steady economic gains and dropping unemployment rates had sparked concerns that the Fed would move up that timeline.

In a surprising hiring slowdown, U.S. employers added only 142,000 jobs in August, the Labor Department reported last Friday. Economists had expected 225,500 jobs to be added.

The unemployment rate, as expected, fell slightly to 6.1 percent from 6.2 percent in July, restoring it to June levels. This drop in unemployment numbers can be partially explained by people dropping out of the workforce.Markets in general, however, remained strong despite the jobs numbers.
The predicted strength of U.S. currency is also a factor in how investors judge the prospects of gold, since investors often hedge gold against the dollar. The dollar recently hit a 6-year high against the Japanese yen and its highest level against the euro in 14 months, putting pressure on gold prices.

Recent downtrends in gold prices mean that investors have had little pressure to buy quickly.

Demand for gold down

Overall though, demand for gold is falling. On Thursday, Aug. 14, the World Gold Council reported that the worldwide demand for gold fell a shocking 16 percent in the second quarter.

This is likely a sign that the market is stabilizing after a particularly strong 2013.

In 2013, consumer demand for gold jewelry increased by about 13 percent. Gold jewelry is valued based on its weight and purity. Demand for gold bars and coins rose by 26 percent in the same period. Gold prices have risen an estimated 70 percent in the last two years.

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