Written by Sumit Roy  |

February 03, 2012

Week In Review: Gold & Silver To Extend Rally Despite US Job Boom, WTI-Brent Spread Spiking

Details

We examine the latest developments in commodity markets and the week’s performance.

The rally in commodities slowed down this week, but prices continued to advance amid positive economic data. As has been the case for most of this year, energy underperformed, while stock markets outperformed. The S&P 500 rallied by 2.1 percent to a fresh six-month high above 1344.

Macroeconomic Highlights

We saw extremely strong economic data in the United States this week. According to the Bureau of Labor Statistics, nonfarm payrolls increased by 243K in January, well above the 160K that was expected. Private payrolls expanded by 257K, above the 160K anticipated. In turn, the unemployment rate dipped to 8.3 percent, the lowest rate since February 2009.

In China, the PMI Manufacturing gauge rose from 50.3 to 50.5 in January, topping analyst expectations of 49.6.

Meanwhile, the news was mixed in Europe. Unemployment in the eurozone hit a euro-era record of 10.4 percent in December. But Italian and Spanish 10-year bond yields plunged to multimonth lows at 5.7 percent and 4.98 percent, respectively, indicating a sharp retrenchment in sovereign debt worries.

Commodity Wrap

• Palladium was the top-performing commodity of the week, as an improvement in the economic outlook spurred buying in the industrial metal. Fellow autocatalyst, platinum, also rallied.
  
  The monetary metals gold and silver eked out gains of less than 1 percent. Modest selling pressure hit the duo Friday on a reduction in safe-haven demand amid the strong U.S. employment report, but the trend for both is still strongly to the upside, as we wrote in our latest Precious Metals Monitor. The next key level to watch for gold is $1800, while the next area to watch for silver is between $35.50 and $36.50.
  
  
  Spot Gold:

Source: Bloomberg

Spot Silver:

Source: Bloomberg