Gold can help but shine, especially when major economies of the world are not rising from the doom and gloom.
Spurred by weak US jobs data, spot gold hit a fresh two-week high of $1545 an ounce on Friday, reinstating investors trust in the commodity in the face of flailing economic conditions.
Investors, who were expecting an addition of 90,000 jobs to the US payroll in June, were disappointed when US Labour Data showed that only 18,000 new jobs were created.
Unsurprisingly, the unemployment rate in the most influential economy also inched up to 9.2 percent in June from 9.1 percent in the previous month, further casting doubts about the health of the US economy.
US employment data is critical for gold because it is a key determinant of the US Feds policy. Damp employment data indicates that the Fed is unlikely to prop up interest rates, which currently remain close to zero percent, tilting investors interest towards gold.
Reuters quoted analysts observation of bond traders expectations: "The Fed will not begin to raise interest rates until late in 2012 and...short-term rates will remain below one percent through the first half of 2013."
And so long as the outlook on the Feds rate remains bearish, gold is likely to keep doing what it does best; stay golden.
With much ado prevailing in the worlds biggest economy, which dashes any hope of economic recovery, the next closest parallel, the EU has a chain of sad stories to tell of its weak members.
Economic ailments, of Greece and Portugal in particular, have plagued the entire bloc and made investors wary of placing their faith in it.
Expectations of the recovery of these economies remain mild, despite the Greek parliament approving an austerity package, primarily because of the colossal debt borne by the economy which puts to shame any hopey-changey talks about getting the sick member and, eventually, the EU back on track.
Consequently, with risk-aversion dominating the scene, gold becomes a favourite safe-haven option for those looking to park their funds.
David Jollie, an analyst of Mitsui & Co Precious Metals - a Japan based metals trading company - was quoted by Reuters, explaining the skewed interest towards gold: "(It) can be a risk-aversion thing rather than a view that gold will appreciate in price."Given the global economic scenario as it appears now, the glory days of gold will likely linger on for some time. As for the longer term, the northward journey may reverse, depending on the pace and extent of recovery in the power economies (read: US and EU).
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