Daily Market Update 2/4/11

Gold’s sharp $30 turn-around on Thursday resulted from two culprits, Ben Bernanke and Jean-Claude Trichet. Both central bank leaders signaled no change to the bank’s low interest rate policy, while acknowledging rising food and energy prices.

Today the U.S. Labor Department reported that the unemployment rate fell unexpectedly to 9.0% in January, a 21-month low, as nonfarm payrolls rose by just 36,000. The 36,000 increase in jobs was much lower than market expectations of a 140,000 gain

Gold ended today with a small loss, and Silver with a small increase, but both were up for the week.  Gold finished the week at $1,350 an ounce, and silver at $29.13 an ounce. What is very important about yesterday’s and today’s gold trading was that gold broke out and held above the important $1,346 resistance level. Many of the floor traders believe that gold has put in a near-term bottom and they are now reluctant to short gold on rallies.

Interesting Gold News:

• The highly respected London’s Financial Times reports ---  Precious metals traders in London and Hong Kong said on Wednesday they were stunned by the strength of Chinese buying in the past month. "The demand is unbelievable. The size of the orders is enormous" said one senior banker, who estimated that China had imported about 200 tonnes in three months.
• The Chinese government reported a five-fold increase in gold imports over the first 10 months of 2010. The Financial Times quotes UBS gold strategist Edel Tully as commenting that not only is China on the fast track to replace India as the largest physical consumer of gold, but that now the Chinese New Year holiday (which starts today) has already become significantly more important than India’s Diwali Festival in gold buying volume terms.