gold bars and gold coins

Gold Price Rises, Ignores Labor Data

May 11th, 2017 by

gold bars and gold coins

In spite of the release of Labor Department data that indicate greater improvement in the job market, the precious metals inched a bit higher again on Thursday morning. Spot gold was up 0.25% to about $1,222/oz while spot silver added 0.4% to about $16.25/oz.

Platinum only gained 0.1% in early trading, although palladium surged 1% to around $805 an ounce.

Job Openings Rise

There was little reaction in the gold market to the most recent statistics regarding unemployment and the job market from the U.S. Department of Labor. One of the major revelations derived from the data was that the number of Americans collecting unemployment benefits actually dropped to its lowest since 1988, a 28-year low.

This came among a slew of other information contained in the Job Openings and Labor Turnover Survey (JOLTS) report. Not only was unemployment persistently low, but the number of available job openings in the U.S. also rose as workers become more confident in their ability to advance up the company ladder, switch jobs, or simply find new work more easily. This effect is not evenly distributed across all industries, of course, but is still evidence of a general trend that economists believe is worth noting.

In a separate Labor Department report, wholesale prices saw a welcome rebound, which would signal higher inflation finally beginning to take effect.

Around the Economy

11290226 - folder with business chart, graph and money

After staging a considerable rally over the past few weeks, the stock markets in the U.S. trended lower in Thursday’s trading session. It seems logical (one might even venture to say “natural”) that stocks would begin to lose steam after recently reaching all-time highs. Overall, all three U.S. indices were about 0.6% into negative territory in early trading. Besides the typical giants of Alphabet (i.e. Google), Amazon, and other major U.S. firms outside of the broad technology sector, two other securities have been receiving a disproportionate amount of attention in the news of late.

The first has garnered attention for the incredible climb of its share price. Wayfair (W) shares have been skyrocketing thanks to speculation that the company may be bought out by Wal-Mart (WMT) in order for the corporate giant to better compete with the ascendant Amazon in retail. Wayfair has added a shocking 33% in just the past week or so amid the merger buzz.

For the opposite reason, Snap, Inc. (the parent company of the popular app SnapChat, also saw its share price plummet more than 20% this week due to a particularly poor quarterly report. In fact, the losses were so bad that they caused the co-founders of the company (presumably very large shareholders) to each lose over $1 billion of value from their respective investment portfolios. Shares of Snap (SNAP) lost nearly another 20% on Thursday morning, causing a bit of a media frenzy and a crisis for the company.

Elsewhere in the U.S., the dollar gained 0.1% on the DXY index to 99.75, erasing nearly all of its recent losses relative to other major world currencies. At the same time, the swift sell-off in bonds has continued. The 10-year Treasury yield rose to 2.42%, more than 30 basis points above the bonds’ near-term low in yield.

Central Banks Hog Spotlight

The Bank of England (BOE), the central bank for the United Kingdom, concluded this week’s policy meeting by leaving its key interest rate unchanged and its program of asset purchases (essentially quantitative easing, or QE) intact. Still, the central bank admitted that there’s only so much monetary policy can do to face the challenges of a slowing global economy. Moreover, the continuing Brexit standoff between Britain and the European Union (EU) will undoubtedly complicate the situation.

Still, with the foretold devastating recession that Brexit would trigger having yet to materialize, consumers and economists alike are improving their outlook for the U.K. economy, which is still one of the largest in the world—especially on a per-capita basis. This optimism has prompted to BOE to warn that it may hike interest rates earlier than initially expected—i.e. before 2019.

Meanwhile, when it comes to central banking in the U.S., New York Fed President Bill Dudley suggested (in response to an audience question after a speech in India) that the Federal Reserve may begin trimming its bloated balance sheet in the next year or so. A strategic move of this kind could be a boon for equities and would essentially begin the process of unwinding years of quantitative easing.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

Leave a Reply