Gold: Best Week Since 2009

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 |  Includes: DUST, GDX, GDXJ, GGGG, GLDX, NUGT, PSAU
by: Market Blog

By David Berman

Gold is having a good week. In New York, prices rose again on Friday, hitting $1,544 (U.S.) an ounce, marking a five-day winning streak with total gains of $57 or 3.8 per cent. And while gold producers have often lagged the price of the gold, this week shows the opposite trend: The NYSE Arca Exchange Gold BUGS index has risen 4.1 per cent over the four days that the U.S. stock market was open.

Bloomberg News noted that this is gold’s biggest weekly advance since November 2009 and pinned its latest uptick on Friday’s awful payrolls report from the U.S. Labor Department. Apparently, no jobs means no interest rate increases, which means no rise in the U.S. dollar. Gold, which is priced in U.S. dollars, tends to rise when the U.S. dollar is under attack.

The problem with this theory, though, is that gold moved higher on Monday through Thursday, as well, when upbeat readings on the U.S. service sector in June and a boffo report on private sector employment from Automatic Data Processing (aka the ADP report) suggested that the recent soft patch in U.S. economic data was drawing to a close. In other words, gold also rallied when investors could envision higher rates and a stronger U.S. dollar.

Ah, but then again, strong economic data can equate to higher inflation, which some observers believe is a boon for gold prices. Hey, wait a minute: Either way, gold wins. Does that make sense?