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Weak ADP Report Sparks Interest In Gold
Posted April 2nd, 2014
TANGIBLE INVESTMENTS - Los Angeles - by James O'Dell - Gold and silver prices rallied more than one percent on Wednesday as gold advanced to $1,292.10 an ounce, and silver rose to $20.02 an ounce, on bargain hunting and short covering, after ADP reported earlier in the day that private employers added just 191,000 workers in March, falling short of economists’ estimates and sending investors scrambling for the safety of gold.
Analysts were reportedly looking for a non-farm payrolls report on Friday in the 200k to 225k range, but the weak ADP report may have changed that outlook. "At the moment we are seeing some short-covering from those who had been waiting for a deeper correction but that shouldn't take away from the fact that the main event remains the NFPs (non-farm payrolls) on Friday," said Saxo Bank's Ole Hansen.
Economists were expecting what was being called a spring snapback in hiring, after arguing that it was the harsh winter weather that depressed the February and January jobs numbers. When that failed to show up in the ADP report, investors turned to bullion as a safe haven.
Meanwhile, it appears that India’s import restrictions have narrowed the current-account deficit (CAD), as intended, making it more likely that authorities will lift restrictions on gold imports. Recent data supplied by the India Gems & Jewelry Trade Federation shows that gold imports in the fiscal year just ended are unlikely to top 600 tons, far below the 845 tons imported the previous year.
“This is likely to have noticeably eased the country’s current account; according to the finance minister, its deficit could total $35 billion, which would equate to around 2 percent of GDP (gross domestic product),” said Commerzbank. The CAD had previously been as high as $88.2 billion. “A loosening of the import restrictions thus appears more probable,” said Commerzbank while citing reports that the finance minister is currently in discussions with the central bank on easing restrictions.
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