Factors Affecting Gold on Friday May 2, 2014

May 2nd, 2014 by

confusedWhat Happened Yesterday?

Markets were choppy yesterday, due to China, India, and the largest economies in Europe being on holiday.  Gold and silver were lower by about a half-percent, platinum gained in the afternoon to finish almost flat, and palladium rode strength in European trading to a modestly higher finish.

Stocks were higher on strong consumer spending reports, and shrugged off a big jump in jobless claims, but faded in the afternoon.

What’s Up For Tomorrow?

U.S Non-Farm Payrolls for April

This is one of the most important economic reports every month. Unlike the ADP Private Sector Payrolls report, the official report from the U.S. Bureau of Labor Statistic includes private and public (federal, state, and local government) sector employment.

What To Expect:

The non-farm payrolls report in March continued the trend of growth in the private sector, and contraction in the government sector. Payrolls were up 192,000 from February, and the private sector employment is now at pre-financial crisis levels. The economy and unemployment rate are being held back by layoffs in government.

Analysts are expecting a bigger jump for the April numbers, expecting 215,000 jobs were added. They predict this will drop the unemployment rate to 6.6% from 6.7%. Watch the labor participation rate, as there are vast numbers of unemployed that are not counted by the government if they aren’t actively seeking jobs. As the economy improves, more of those people come back into the market for a job.

Effect On Gold:

This is THE big mover for the markets. Gold will react to how the stock and bond markets take the news. If anything is going to shake gold out of the narrow $1,280-$1,300 range it’s been in lately (aside from a war in Eastern Europe), this will be it.

European Manufacturing PMI

Germany and France report manufacturing PMI today. These are the top two economies of the EU, so Euro markets will be watching these reports closely. Germany needs to keep running strong, and France needs to get their act together and improve their numbers some more.

Composite EU manufacturing PMI is also on tap.

What To Expect

Analysts anticipate German numbers to continue to improve, but see French industry backsliding. The composite numbers should improve slightly.

Effect on Gold

People are spooked over the possibility that the disinflation being caused by the distressed economies of southern Europe could devolve into deflation. Unexpectedly poor numbers is going to increase the pressure on the European Central Bank to start Fed-style money printing, which will also have the effect of weakening the euro.

U.S. Factory Orders for March

This is factory orders for both durable and non-durable goods. Civilian airliner and automobile orders play a large part in this report.

What to Expect

February numbers got a huge boost from Boeing, which saw large aircraft orders. The domestic automakers have been over-producing and stuffing inventory at the dealer level, so there may be only so much more they can do to inflate their numbers. Analysts still expect a 1.4% increase over February, which saw a robust 1.6% increase over January.

Effect on Gold

Good factory orders would be a sign of a revving economy, and pull more money into the stock market. More money into equities means less money for gold.