Gold and silver snapped a five-day rally yesterday on news of a narrowing trade deficit in the U.S., and are seeing pressure from a better than expected ADP payrolls report. The report showed 238,000 private sector jobs were added in the U.S. in December. This is much stronger than the 200,000 expected. The ADP report doesn’t count public sector jobs, which has been seeing contraction. This usually gives a happier outlook than the official payroll report, which includes both private and public sector jobs. The ADP numbers helped the dollar briefly touch a six-week high.
U.S. stocks opened lower on the news, as it reinforces the Fed’s decision to start scaling back its “money printing” for the benefit of Wall St. Markets will get a closer look at the Fed’s rationale with the release this afternoon of the FOMC December meeting minutes.
Platinum and palladium are trading in a tight range, seeing support from labor unrest in South Africa. That nation, the world’s largest producer of platinum, is marking the tenth week of strikes at Northam’s platinum mine in Zondereinde. The National Union of Mineworkers has been demanding a 16% pay raise on top of a 69% increase in “living-in” expenses (a sort of per diem.) The strike, which has been going on since November 3, has already cost the company 25% of annual production at the mine.
Euro shares are still near 5.5-year highs on yet more good news from Germany. Exports there rose for the fourth month in a row. It’s not all sunshine and roses in Euroland though, as unemployment remains at record highs due to Italy, Greece, and Spain.
Gold is getting physical support from Asia, as the Chinese New Year gets closer. Spot premiums on the Shanghai Gold Exchange hit $18/oz yesterday, and over 26 metric tonnes of gold was delivered through the SGE in two days.
More support is being gained from safe haven demand, due to unrest in Thailand, Tunisia, South Sudan, and Syria, where the civil war has taken a bizarre turn. The Islamic State of Iraq and the Levant, which is an expeditionary force of Al Qaeda in Iraq, has so alienated the Syrian populace with its draconian imposition of Sharia law in areas that it controls, that other rebel groups have united against it. This anti-ISIL coalition includes the official Al Qaeda group in Iraq, the Nusra Front. Combined rebel forces recently drove ISIL from its main base in the northern city of Aleppo, as well as other strongholds.
Al Qaeda in Iraq is also making a strong push to take over the city of Fallujah in Iraq, to expand territory under its control. Much like in Syria, the local population is not thrilled with the idea of being subjugated by foreign extremists, and are resisting.
With start-of-year index rebalancing pretty much over in the West, gold will be looking at the Chinese New Year on January 31, and rumors of a loosening of gold sanctions in India for support. The release of the FOMC minutes is likely to be the major market mover ahead of Friday’s official non-farm payrolls report from the government.