Gold and silver prices surged higher Friday as economic data out of the United States as well as developing economic trends out of the European Union pointed to an overall worsening of economic conditions and prompted investors to rely on gold and silver as an economic hedge.
The spot price of gold rose 3.2 percent during intraday trading, breaching the psychologically important $1600 per troy ounce level and reached as high as $1610.20 per troy ounce. In intraday move 3 percent is significant in any commodity and it should serve as an indicator of the severity of the economic data that is arising now from the euro zone and also from the United States. Silver showed a 2.71 percent gain and is bidding again above the $28 dollar level, now at $28.46 an ounce.
Particularly disappointing among the economic data was the US jobless report, which showed job creation has essentially stalled in the month of May. Projections had previously been set for the creation of around 158,000 jobs, which is low considering that 200,000 jobs need to be created per month just to keep up with inflation. This current economic data is a far cry from the economic data that we had previously brought a great deal of optimism to the markets. Recently, the February job report, which added 200,000 jobs to the economy, was taken as a herald of a new economic era.
This most recent data however is a very strong indicator that the economy has not turned a corner. While we have managed to avoid the abyss, we are still in very difficult economic times in which very few jobs are being added to the economy. The news out of Europe is slightly more drastic, considering that Spain is now making the media rounds with stories that its sovereign debt problems have been as bad as Greece’s for some time. There are also reports that Greece is preparing for an exit from the euro zone and from the euro currency.
Gold and silver are necessarily going to be very strong players during all of this. They’re sound, fundamental currencies that are going to stand strong while there is fundamental weakness in the US economic base and chaos in the euro zone. Investors have been using gold and silver, particularly in the past three years, to hedge everything that has anything to do with international finance because of the problems coming out of Europe.
Now that the problems in Europe are taking a new turn for the worse and the economic problems in the US are showing more of themselves, we can expect a similar resurgence and uptick in the use of gold and silver by individuals and investors in order to stave off the economic problems.