The price of gold surged on Friday scaling the crucial 1,300 an ounce level after disappointing US jobs indicated US monetary policy is likely to stay accommodative for longer.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery in midday trade exchanged hands for $1,305.80 an ounce, up more than $20 compared to Thursday's close.
Volume was robust with 110,000 contracts traded by 12:15 EST, compared to average daily volumes on the exchange of around 160,000.
The US economy created 192,000 jobs in March against consensus expectations of at least 200,000 new positions. Some predicted much higher employment growth as the jobs market emerges from its winter lull.
March sub-par numbers were not a train smash and the overall unemployment rate did stay flat at 6.7%, but after three disappointing jobs reports in a row – the Fed's key measure in deciding interest rates – supporters of the Fed's economic stimulus program are back in charge.
US Federal Reserve chair Janet Yellen on Monday made very dovish comments about the bank's quantitative easing program saying "extraordinary commitment [to monetary stimulus] is still needed and will be for some time."
The QE program together with other stimulus measures saw the balance sheet of the Fed cross the $4 trillion mark in January, up 400% in seven years.
Monetary expansion across developed economies, particularly since the financial crisis, has been a massive boon for the gold price, burnishing the metal's reputation as an inflation hedge and storer of wealth.
Gold was trading around $830 an ounce when previous chairman Ben Bernanke announced QE1 in November 2008.
Not everyone is convinced Friday's non-farm payrolls will have a big effect on US monetary policy and that cutbacks in QE will continue through year end and that interest rates could start rising mid-2015.
If the QE program ends on schedule and rising rates boost the dollar it is bad news for gold.
Gold and the dollar usually move in opposite directions and investors would rotate into yield-producing assets over gold, which offers none.
As far as I can tell, this ship has sailed.
Marketwatch quotes Jeffrey Wright, managing director at H.C. Wainwright as saying: " As far as I can tell, this ship has sailed. [The] FOMC had a chance to restrain [the] taper and chose not to in February and March, with worse data points than an 8,000 miss on jobs".
Walter de Wet of Standard Bank believes the rally in gold will fade and expectations this year of a rise in real yields on US government bonds, which negatively correlates with the gold price, will push the bullion price down.
Gold is well off its 2014 high struck in mid-March, but remains up 9% so far this year.
