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Jobs Report Does Little to Move the Needle for Gold Pricing

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This morning the U.S. Labor Department released its monthly jobs report. It seemed to follow the trend created earlier this week when the ADP jobs report indicated that only 135,000 new jobs were added last month. Today the Labor Department’s numbers came in under expectations, which were tepid at best, forecasting that there would be the creation of approximately 145,000 new jobs in September. The actual numbers came in just under that estimate at 136,000 new nonfarm payroll jobs gained last month.

The reaction by market participants was lethargic to say the least. Once numbers were released it prompted gold prices in both the futures and spot markets to rise slightly. However, within moments after the report numbers came out traders began to take pricing moderately lower. Gold futures opened in New York at $1511.60, and traded to a high of $1522.20, and a low of $1501.40 during the trading session. However, this changed once the numbers came out with gold trading off by just over three dollars.

As of 5:15 PM EDT the December contract of gold futures is currently bid at $1510.30, which is a net decline of $3.50 on the day. The dollar had little influence on current pricing as it traded fractionally lower down -0.05%, and is currently fixed at 98.495.

Now that the jobs report numbers have been released market participants and analysts are looking forward towards the end of the month when on October 29 Fed members will meet for this month’s FOMC meeting which will conclude the following day on October 30. The Fed has stated that any changes to the current Fed funds interest rate will be absolutely data dependent. In fact, Chairman Powell in his last press conference made it clear that the forward path of decisions by the Federal Reserve are not etched in stone and will be dealt with on a month to month basis, as new data becomes available to them.

The question then becomes how will the Federal Reserve interpret today’s data. While the numbers came in just under estimates, both the actual numbers and estimates were subdued at best. The only silver lining in today’s numbers was an unexpected drop in the unemployment rate. Today’s numbers revealed that the unemployment rate has dropped to a new historical low at 3.5%, below analyst estimates which were of an unchanged unemployment rate at 3.7%.

While the data suggested a contracting number of new jobs and a slowing wage growth, U.S. equity traded substantially higher on the news. The Dow Jones industrial average gained almost a full one and ½%. When the dust settled for the first trading week this quarter the Dow gained 372.66 points and closed at 26,573.72.

That being said the report can only be viewed as moderately negative, and the question now becomes how the Federal Reserve members will view these numbers and what action if any will result from the recent data. About the only thing that we can glean from the data released today is that according to the CME’s Fed Watch tool the probability of a rate cut at the end of this month has gone from 88.7% to 76.4% in a single day, while the probability that Fed members will leave interest rates alone has gone from 11.3% yesterday to 22.6%.

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Wishing you as always, good trading,

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