SHORT SQUEEZE: Gold price spikes $40
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at $1,251.50 an ounce during early afternoon dealing, up $40 from the $1,210.80 low struck shortly after the opening. Silver tracked gold's trading pattern, jumping more than 4% to a day high of $19.89.
The precious metal has been under pressure as markets believe a recovering economy – and specifically an improved labour market – could prompt the US Federal Reserve to slow the pace of its $85 billion in monthly bond purchases as soon as December.
The market got its first taste of the state of US employment today, with the November ADP non-farm payroll number coming in at 215,000 jobs added, easily beating the 172,000 forecast and the 184,000 reading in October, which was also revised upwards from 130,000.
A strong number usually leads to a sell-off in gold as it strengthens the hands of Fed members who are eager to start unwinding the near $4 trillion the central bank has taken onto its balance sheet since QE1. The Fed first embarked on its quantitative easing program in December 2008 when gold was trading around $830 an ounce.
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