Gold settles lower after jobs report

By Alix Steel, TheStreet

Updated at 4:50 p.m. ET

Gold prices settled slightly lower Friday as investors digested gold's violent and sudden rally Thursday and an underwhelming report on jobs.

Gold for April delivery dipped $4 to settle at $1,349 an ounce at the Comex division of the New York Mercantile Exchange. Gold traded as high as $1,361 and as low as $1,345.50. The spot gold price was shedding $6.80, according to Kitco's gold index.

The U.S. dollar index was gaining 0.4% at $78.03 while the euro was slipping 0.4% at $1.36 vs. the dollar.

Gold prices had been shielding themselves for a good jobs number, but the Labor Department reported Friday that the U.S. economy added only 36,000 jobs in January -- far fewer than expected -- even as the unemployment rate dropped to 9%.

Wall Street, however, seemed to like the data: The Dow Jones Industrial Average ($INDU) gained 30 points to close at 12,092, the S&P 500 ($INX) rose 4 points to 1,311, and the Nasdaq ($COMPX) rallied 15 points, or 0.5%, to finish at 2,769.

Monthly jobs data is a lagging indicator. Better manufacturing data, factory orders, and higher activity in the service sector all point to economic expansion with the labor market to follow.

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Digesting the jobs number is the least of investors' worries. Gold prices lurched 1.5% higher Thursday on remarks by Federal Reserve Chairman Ben Bernanke and European Central Bank President Jean-Claude Trichet. Both leaders reiterated their commitment to low interest rates despite acknowledging rising food and energy prices.

Although the headlines were nothing new, rumors had been circulating that Bernanke would raise rates as the U.S. economy strengthened and Trichet would also curb growth to fight inflation, which he particularly detests.

Trichet said he was more committed to growth than fighting higher prices for the short term, and Bernanke said that a recovery isn't truly established until there is a long period of stronger job creation and that it would take years for the unemployment rate to dip below 6%. The commitment to low rates was a green light for gold buyers.

Low rates and rising inflation equal negative real interest rates, an environment in which paper money is worth less. Typically, that situation leads investors to protect their wealth with gold.

Jon Nadler, senior analyst at Kitco.com, also blames short-covering and opportunistic fund buyers looking to buy gold at lower prices. If the majority of Thursday's rally was technical, then traders could ditch gold just as fast as they bought it.

Scott Redler, chief strategic officer at T3Live.com, who trades the SPDR Gold Shares (GLD) fund, was looking for a strong up move before getting positive on gold.

"Gold proved it can hold higher and broke above the established downtrend ... As long as GLD holds $131 moving forward it can start a new trend." Shares of the gold ETF were trading 0.6% lower at $131.41 Friday.

Gold investors will have to keep one eye on Brussels where European Union leaders are meeting to discuss the current European Financial Stability Facility. Leaders will discuss beefing up its reserves and the possibility of making it bigger and permanent starting in 2013.

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Germany, the strongest EU nation, will push for stricter guidelines for how weaker countries can change their financial systems to fix their current debt issues a well as promote long-term fiscal health.

Silver prices were still moving higher after the close, up 37 cents to $29.10 per ounce, while copper settled up 3 cents at $4.57 per pound.

Gold mining stocks, a risky but potentially profitable way to buy gold, were mostly lower Friday. Barrick Gold (ABX) closed down 1.2% at $48.11, Randgold Resources (GOLD) lost 0.5% to $79.96 and AngloGold Ashanti (AU) dropped 1.5% to finish at $44.73.

Newmont Mining (NEM) fell 0.6% to $56.97, a day after announcing a $2.3 billion acquisition of Fronteer Gold (FRG). Investors typically view acquisitions negatively in the short term, as they can be dilutive for shares, but the acquisition gives Newmont access to more than 4 million ounces of gold reserves. The company paid roughly $547 for each ounce.

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