Gold prices rose sharply this week as demand for safe haven assets got a boost from Moody’s decision to cut Portugal’s ratings to junk and dismal US jobs data.
Rating agency Moody’s decided to slash Portugal’s sovereign rating from Baa1 to Ba2 with a negative outlook on Tuesday, bringing Europe’s debt problems back into focus.
It is now speculated that other debt-laden euro zone members, Ireland and Spain, could see their ratings reduced, delivering another setback to their efforts to tackle their fiscal problems.
On Friday, an update on non-farm payrolls from the Labor Department showed that the economy created just 18,000 new jobs last month, while the rate of unemployment increased from 9.1 percent in May to 9.2 percent in June.
Analysts expected to see a gain of over 100,000 in payrolls after Thursday’s report from ADP said that the private sector created 157,000 jobs last month.
The weaker than expected data reduced appetite for riskier assets, sending equity and commodity markets around the globe into a freefall and increasing gold's safe haven appeal.
The yellow metal was also used as a hedge against inflation. Traders were concerned that the slowdown in job creation could prompt the Federal Reserve to consider another round of quantitative easing to spur the economic recovery.
The Fed’s previous US$600 billion stimulus programme, which was designed to increase inflation to encourage more spending, concluded at the end of June.
Gold ended the week at US$1,544/oz, up from last Friday’s close of US$1,486/oz.
Silver climbed from US$33.85/oz to US$36.71/oz and platinum advanced from US$1,715/oz to US$1,735/oz.
Gold producer Randgold Resources (LON:RRS) rallied from last’s Friday’s close of 5,175 pence to 5,225 pence.
Silver miner Fresnillo (LON:FRES) rose from 1,399 pence to 1,424 pence, but platinum producer Lonmin (LON:LMI) declined from 1,445 pence to 1,413 pence.
FTSE 250 gold miner African Barrick Gold (LON:ABG) was unchanged from a week ago at 420 pence.