Gold Rallying On Jobs Data

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The gold market is higher today as the non-farm payrolls data was a bit better-than-expected. According to the report, the U.S. added 315,000 jobs in August. Consensus estimates were looking for an increase of 295,000 jobs. While this headline figure is solid at first glance, the report did also contain some negatives. Both June and July were revised lower, with June seeing a sharp revision of over 100,000 jobs.

 

On the plus side was wage growth not growing as quickly as expected. Wages were up .3% in August while estimates were calling for a rise of .4%. The slower wage growth could potentially point to inflation easing a bit and possibly already having peaked. While this may at first appear to be bearish for gold, it could also be construed as being bullish if the Fed does not have as much reason to continue its aggressive tightening.

 

The Fed is still quite likely to tighten rates later this month at the next FOMC meeting. The Fed Funds rate is seeing heavy betting to be increased by another 75-basis points when the Fed does meet. Nearly all discussions of a Fed pivot away from the inflation fight have dissipated. Chairman Powell has tried to make it abundantly clear that the central bank sees inflation as the biggest risk to the economy and will look to get it back to desired levels regardless of the consequences.

 

Gold and other markets could find themselves trading range bound until the next FOMC meeting this month. Gold has seen its market volatility largely dry up in recent weeks, but that could change if the Fed does or says something unexpected in a few weeks when it meets again. In the meantime, the $1700 and $1800 levels are still technically significant.

 

The bears took prices below $1700 on Thursday but failed to maintain that action on Friday. The lack of follow through is nothing new for gold, however, and at this point may be expected. The bears do seem to have the edge, however, despite Friday’s market strength. This could lead to another test of $1700 next week If able to produce a close below this level, the bears would be in firm control and may embark on a fresh leg lower in price.

 

How low gold could possibly go is another question entirely. The long-term narrative for gold remains highly bullish. The U.S. and other nations are riddled with massive, unpayable debt. Paper currencies will continue to lose value as they have done for millennia. These and other issues may keep gold on the rise over the long run. Gold may become the only reliable and useful form of money left on the planet at some point. When it does, its value is likely to be sharply higher than current levels. Gold at $3000, $5000 or even $10,000 per ounce or more is not only not out of the question but increasingly likely.

Gold Sunk By Stronger Dollar and Rising Yields

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The gold market is lower today as a stronger dollar and higher yields take a toll on the market. A lower crude oil market is also not helping gold at all as the metal sinks to the key $1700 level. While the market appears ready

to close right at $1700, the bears are very close to producing a close below this level that could entice more bears to get short. A close below the $1700 level could set the market on a lower trajectory and make it more difficult for the bulls to recover.

 

The yellow metal is responding to the same old trifecta of the dollar, yields and oil. These outside markets are all in a bearish posture for gold today and could remain in such a position for months to come. The Fed’s hawkish rhetoric is playing a role, as it will likely support the dollar and yields in the months ahead. As long as the dollar continues to rise, the gold market may have little to no upside traction.

 

New reports of major Covid lockdowns in China may be affecting markets today. According to reports, some 21 million people have been locked down due to an outbreak. This is not good news for the globe’s second-largest economy. The U.S. and other nations are already fighting what may be an inevitable recession. If China sees a major slowdown due to Covid, look out below. Stocks could potentially tank and the gold market could potentially receive some of the capital that exits equities and risk assets. September is oftentimes a rough month for stocks, and the first day of the month this year is proving to be no different.

 

Not only are new Covid lockdowns affecting market psychology, but some poor data out of China is also having a negative effect. Both the Purchasing Managers Index as well as housing data showed weakness. If the poor data stream turns into a trend it could equal major trouble for U.S. and global markets.

 

To be clear: The long-term bullish narrative for gold remains firmly intact. The U.S. is still riddled with massive, unpayable debt. The dollar is still an essentially worthless piece of paper. The time for gold will come, the only question is when. That makes now, right now, the ideal time to start or continue stockpiling this important metal. Prices at current levels may be seen as fire-sale level and may not be seen again, ever, once the market turns higher. For the patient, long-term investor, gold prices at sub-$1700 may be an unbeatable deal.

 

Long-term investors who step into the gold market here may be substantially rewarded in the years ahead. If gold does keep moving lower, no problem. Lower prices should not be feared, but should be welcomed. Once the market does turn, it may turn rapidly. Get yourself involved in gold now before that inevitable turn occurs and you may be very pleased down the road if gold reaches $3000, $5000 or even $10,000 per ounce or more.

Gold Under Pressure Even As Jobs Data Misses

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The gold market is under some light selling pressure in early action Wednesday. The yellow metal has remained lower despite the ADP jobs figures coming in lower-than-expected. The ADP employment data showed a rise of just 132,000 jobs in August. Estimates were looking for an addition of 300,000 jobs.

 

Although some analysts may use the ADP data as an estimate of non-farm payrolls figures due Friday, the ADP data has never been much of a predictor. ADP has been on hiatus to revamp its methodology. The company now seeks to outline its own views of the economy rather than being an estimate of non-farm payrolls figures. Despite the miss in the data, gold showed little to no reaction.

 

The gold market is moving further away from the $1750 level as the bears gather some steam. The major test, however, would be at the $1700 level. If able to produce a close below this level, the bears could force more longs to exit the market and a fresh wave of sellers to enter it. This could, in turn, drive the price of gold sharply lower before it finds more stable footing.

 

The bigger jobs report will be released Friday and could be market-moving. If the non-farm payrolls figures also miss expectations by a wide margin, it could give the Fed much to consider in the weeks until the next FOMC meeting next month. If the data is in line or better than expected, however, it would almost certainly cement an aggressive rate hike from the central bank next month. Given some recent commentary from Fed Chairman Powell, it does not seem likely that the Fed will start to pivot away from fighting inflation anytime

soon. In fact, the Fed may now continue hiking rates aggressively until the end of the year, possibly putting key rates at or above the 4% level by year’s end.

 

Should the Fed maintain its aggressive policy stance, stocks and risk assets could eventually come under increasing pressure. If stocks do roll over again, gold could possibly see some of that capital coming into the market in the months ahead. The question may become, however, at what point does the opportunity cost begin to weigh on gold.

 

With rates around the 4% level at the end of the year, it seems unlikely any investors would be scared away from gold. Depending on what the Fed decides to do next year, however, that could change. The Fed may also not desire to hold rates at elevated levels for any longer than it has to to get inflation under control. Once it has accomplished that task, the Fed could then look to begin easing once again and gold could see significant buying once the threat of higher rates is removed. For the time being, the market may remain mostly sideways and maintain a range until more clarity is provided by the Fed.