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Gold continues to trade lower as U.S. Labor Department releases May jobs report

Commentaries & Views

This week the two important jobs reports were released. Both reports had a profound and bullish impact on U.S. equities, and had the exact opposite effect on the safe haven asset gold, taking prices dramatically lower.

On Wednesday ADP released their report which indicated that private sector employment decreased by 2,760,000 individuals in the month of May. While that number might be considered high when compared to the recent months it is one of the best indications that the economy in the United States is beginning to reignite. Economists and market technicians that were surveyed were looking for that number to be approximately 8.9 million individuals that lost their job in May. The fact that numbers came in so much lower than expected indicates that the worst might be over in reference to the global pandemic of Covid-19.

Today the U.S. Labor Department released the jobs report for May. The numbers showed an incredible jump of 2.5 million individuals that were added to payrolls and a drop of the unemployment rate to 13.3%. These two reports were the necessary fuel to ignite U.S. equities too much higher values. It also was the underlying cause for gold to lose a little over $60 on the week. Breaking below the key $1700 level.

As of 5 PM EST gold futures basis the most active August contract is currently at $1688.60. Today’s decline was even sharper than Wednesday with gold giving up $38.80, which is a net decline of 2.25%.

As upbeat and optimistic as the most recent jobs report have been, there are many analysts, including Martin Baccardaxi of TheStreet believe that the unemployment level will rise to a rate of nearly 20%. This would be the highest rate of unemployment in the United States since the Great Depression.

The key to these two reports regardless of how quickly our country recovers is that the first signs of a turnaround have indicated that the worst of this global pandemic might in fact be over. That is great news on all levels.

However there still is one caveat that we will need to resolve, and that is how we deal with the massive debt that the Federal Reserve and the U.S. Treasury Department have accumulated to help aid American citizens through this difficult time.

We have not begun to even consider how we will deal with the massive economic fallout, but at least for today we can put that aside as people genuinely embrace some news that is uplifting, giving hope to those who have been affected by this pandemic.

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Wishing you as always good trading and good health,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.