Gold weekly recap, February 3 – February 7

Gold rose on Friday, marking the largest weekly advance in more than a month, after US payrolls increased less than analysts forecast. The metal drew support as China, which probably overtook India as the largest consumer last year, opened its markets following the Lunar New Year break. Meanwhile, assets in the SPDR Gold Trust, the biggest bullion-backed ETF, remained unchanged for a fourth day on Friday, after rising 0.5% on February 4, the most since January 17.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in April advanced by 0.78% on Friday to settle the week at $1 267.00 per troy ounce. Prices touched a session high at $1 271.60 per troy ounce, while day’s low was touched at $1 256.00 an ounce.

Gold futures settled the 5-day period 1.8% higher, after losing 2% in the previous week. The precious metal settled last year 28% lower, the steepest annual decline since 1981 as investors lost faith in the metal as a store of value and amid speculation Fed will continue scaling back its monetary stimulus throughout 2014.

“Gold definitely got a bid to it from the weaker numbers,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, cited by Bloomberg. “What remains to be seen is if this is a one-off thing or the economy is showing signs of weakness.”

Chinese demand

On the Shanghai Gold Exchange, which opened today after being shut for a week, since January 31st, trading volumes for bullion of 99.99 percent purity rebounded from the weakest level in two years on January 30th.

According to data by the World Gold Council, China probably overtook India as the largest global consumer in 2013.

Howard Wen, an analyst at HSBC Securities (USA) Inc., today said in a Bloomberg interview: “The re-entry of China into the markets may buoy gold.”

Fed stimulus outlook

Golds demand was heightened on Friday after a government report showed the US employers added fewer jobs than analysts projected.

A report by the US Department of Labor revealed the non-farm payrolls in the country increased by 113 000 in January, well below experts’ forecasts of an increase to 180 000 and after US employers added 75 000 jobs a month ago, the smallest change since January 2011. Data showed that the small number of added jobs in January was driven by retailers and government agencies as they have cut payrolls at the fastest pace in more than a year, while at the same time construction companies and manufacturers boosted employment.

The lower-than-expected number of non-farm payrolls in January raised concerns over the uneven recovery of the US economy and fueled speculations that Fed may slow the pace of scaling back stimulus.

However, gold prices remained under pressure, as last week Fed policy makers reached an unanimous decision to cut Fed’s monthly bond purchases for a second straight meeting by another $10 billion. This was the first meeting without dissent since June 2011 as policy makers were brought together by concern over Fed’s swelled balanced sheet which raised risks of asset bubbles.

The Federal Open Market Committee said it will further trim the central bank’s Quantitative Easing program based on improving labor market conditions and as economic growth accelerated in the recent quarters.

The central bank will probably continue to pare stimulus by $10 billion at each policy meeting before exiting the program in December, according to a Bloomberg News survey of 41 economists, conducted on January 10th.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, remained unchanged for a fourth day on Friday, after rising 0.5% on February 4, the most since January 17. The fund has lost 41% of its holdings in 2013. A total of 553 tons has been withdrawn in 2013. Billionaire hedge-fund manager John Paulson who holds the biggest stake in the SPDR Gold Trust told clients on November 20 that he wouldn’t invest more money in his gold fund because it isn’t clear when inflation will accelerate.