London Gold Market Report

Gold Steady as US Jobless Rate Jumps, Euro Faces "Systemic" Danger; Global Output to Fall Now "Sweet Spots Mined Out"THE SPOT PRICE of wholesale gold held inside a tight $7 range Friday morning as the United States reported its worst monthly job losses since 1974 and Japanese auto-giant Toyota posted its first annual loss since 1950.For the week, Spot Gold in Dollars neared the London close 1.2% below last week's finish, while crude oil slipped back to $40 per barrel.The Euro – to which oil and gold looked tied during the "Reflation Rally" of 2003-2008 – gave back all of a 3¢ bounce to $1.2800 on the forex market.The British Pound meantime rose to a 3-week high of $1.4750, capping the Gold Price in Sterling below £626."The Euro could be in danger if strains in Eastern Europe and the Baltics create systemic risk in Western European banks," reckons Steven Barrow writing for Standard Bank today."This might seem a strange thing to say given that banks the world over are struggling. However, we think the situation could throw up Euro weakness in the same way that Mexico's devaluation in 1994 hurt the Dollar due to hefty US bank exposures."It is certainly something that keeps us focused on a slide in Euro/Dollar down to 1.20 and Euro/Yen down to 100," says Barrow.Versus gold, the Euro slipped below 0.14% of an ounce Friday morning, losing almost 15% of its value against Gold Bullion so far this year.Stock markets retreated from earlier gains, meanwhile, after the US Dept. of Labor reported a loss of 598,000 non-farm payrolls for January – almost one-fifth greater than analyst forecasts.Unemployment rose to 7.6% of the workforce, also beating expectations, while average earnings just crept ahead of inflation."We are not going to get relief by turning back to the very same policies that for the last eight years doubled the national debt and threw our economy into a tailspin," said US president Barack Obama on Thursday."We can't embrace the losing formula that says only tax cuts will work for every problem we face."An independent auditor appointed by Congress said Thursday that US tax-payers handed Wall Street a subsidy of $78 billion in their $250bn purchase of preferred stock.At around 30¢ in the dollar, that estimate beats the Congressional Budget Office's figure of a 25¢ subsidy.Over in the Gold Mining sector, meantime, "We've gone through all the sweet spots," says Graham Briggs, CEO of South Africa's Harmony Mining – the world's No.9 – in a Financial Times report on the country's failing supply."The [ore] grade year on year is downwards."Formerly world No.1 throughout the 20th century, South Africa saw its output fall 14% in 2008, taking it to third place behind the China and the United States.Breaking new records, AngloGold Ashanti – the world's No.3 gold producer – is now having to mine at a depth of 3,778 meters at its Mponeng project in South Africa."Total fabrication demand for gold (comprising jewelry and other sources) was steady in 2008," says a new research note from Barclays Wealth today, "and we expect overall demand to hold steady again throughout 2009."In the medium term," the wealth management group reckons, "global [physical] demand should grow by around 3% a year."On data compiled by BullionVault, Gold Mining output worldwide has shrunk by an average of 1% per year since peaking in 2003.