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Gold prices sharply down after shocking rise in US jobs in May

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(Kitco News) - Gold prices are sharply lower and hit a six-week low in early U.S. trading Friday, in the immediate aftermath of a stunning and completely unexpected big rise in U.S. jobs in May. The employment situation report from the Labor Department showed a rise of 2.51 million in non-farm payrolls in the month, which is way above market expectations for a decline of around 8 million. In the April jobs report, there was a 20.5 million drop in non-farm payrolls. The unemployment rate of 13.3% in May was also way better than market expectations. Risk appetite is now very keen late this week, and that’s bearish for the safe-haven metals. August gold futures were last down $37.00 an ounce at $1,690.20. July Comex silver prices were last down $0.516 at $17.55 an ounce.

Today’s U.S. jobs report from the Labor Department corroborates Wednesday’s much-better-than-expected ADP jobs report. Today’s report also suggests economists and analysts may have it all wrong on the lasting U.S. economic damage that some earlier this week said would take 10 years to fully recover from the Covid-19 pandemic-induced economic carnage. Importantly for metals traders, today’s jobs data suggests the U.S. and very possibly other major world economies will snap back much faster than expected. If that’s the case then, what about the massive monetary stimulus the central banks have pumped into economies? The central banks can’t put that genie back into the bottle. And if major economies recover so quickly, combined with all the cash pumped into the financial system (from central banks expecting lingering economic atrophy), how can such not be inflationary, and even cause problematic inflation? That’s a very bullish scenario for commodity markets, including the metals. Tell me what you think? I always enjoy hearing from my valued readers.

Global stock markets were mostly higher in overnight trading. U.S. stock indexes are pointed toward sharply higher openings and three-month highs when the New York day session begins. The continued central bank stimulus programs keep pushing the growing heaps of cash into the stock markets. The latest influx comes from the European Central Bank, which announced Thursday another 600 billion Euro infusion into the Euro zone economy. Also, there is the perception among global traders and investors that the Covid-19 pandemic has peaked, at least from an economic impact perspective if not also from a human toll perspective. That’s allowing risk appetite to uptick in the markets.

The important outside markets see the U.S. dollar index modestly higher early today on a corrective bounce after hitting an 11-week low overnight. One feature in the marketplace this week has been the slumping greenback and the resurgence of the so-called “commodity currencies” like the Canadian and Australian dollars. Part of the reason has been civil unrest in the U.S. However, it could also be that many of the big speculative “fund” traders are moving into commodities and commodity currencies, reckoning many commodity markets are now longer-term value-buying opportunities and that inflation will flare up in the coming months. Economics 101 classes teach that pumping large sums of money into financial systems creates price inflation.

Meantime, Nymex crude oil prices are sharply higher and trading around $39.50 a barrel. The OPEC cartel and its allies have reached a deal to extend the crude oil production cuts by one month, through July. Since late April the price of Nymex crude has doubled.

The yield on the benchmark U.S. Treasury 10-year note is currently around 0.8%. Bond yields have risen significantly this week, suggesting less risk aversion in the market place, but maybe also some creeping concerns about rising inflation.  

Other U.S. economic data due for release Friday includes the consumer credit report.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold bulls are fading fast as a price uptrend on the daily bar chart has been negated. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $1,750.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,650.00. First resistance is seen at $1,700.00 and then at today’s high of $1,723.20. First support is seen at today’s low of $1,681.50 and then at $1,675.00. Wyckoff's Market Rating: 6.0

Live 24 hours silver chart [ Kitco Inc. ]

July silver futures bulls have the firm overall near-term technical advantage but are also fading a bit. Silver bulls' next upside price objective is closing prices above solid technical resistance at the February high of $19.075 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $17.00. First resistance is seen at $18.00 and then at $18.25. Next support is seen at today’s low of $17.445 and then at $17.20. Wyckoff's Market Rating: 6.5.

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.