Gold corrected by $10 this morning on the release of much better than expected jobless claims in the U.S., dropping slightly below the $1,300 mark. Silver was affected by drop in gold, while the PGMs are only slightly softer from yesterday’s close.
First-time jobless claims in the U.S. plunged by 24,000 applicants last week, as only 297,000 people lost their jobs. This is the lowest first-time jobless report in seven years, signifying that businesses are reducing their workforces at a slower rate. Analysts has expected only a small drop of 2,000 fewer newly-unemployed. Jobless claims for the previous week were revised upward by 2,000.
In other economic news, consumer prices rose at the fasted rate since June of 2013 last month. The CPI increased 0.3% in April. Industrial production by 0.6% in April, after a 0.9% gain in March. The number for March was high due to factories catching up after being frozen in during the first two months of the year.
The ISM factory index rose t o54.9 from 53.7, driven in large part by automobile production. This is increasing demand for catalytic converters, at a time when the platinum mining strike in South Africa has shut down 40% of world production, and Russia is anticipated to cut palladium exports to the West. Russia supplies 44% of the world’s palladium, and South Africa supplies 37% (from those same mines shut down by the violent strikes.)
The euro is at an 11-week low, after first quarter GDP for the Eurozone grew at an anemic 0.2% rate. The falling euro boosted the dollar to a five-week high, putting pressure on precious metals. A stronger yen weighed on Japanese stocks today, with the Nikkei closing down .75%.
Despite the fantastic jobless numbers, Wall St. opened down, and promptly fell lower. This may be because traders are nervous about the Fed increasing benchmark interest rates due to spiking wholesale, food, and consumer costs. The Fed’s “zero interest rate policy” (ZIRP) has allowed massive borrowing by companies to buy back stock (which increases share price) and buy out competitors. It has also allowed a large amount of buying stock on credit.
Food prices look to be the main catalyst for cost-push inflation during a time of stagnant wages. Food costs in April were up 2.7%, and meat costs were up 8.4% for the month.
Fed Chair Janet Yellen speaks tonight, and Hindu nationalist candidate Narendra Modi is expected to be announced as India’s next prime minister when election results are released tomorrow. Modi has promised relief to a jewelry sector that has seen hundreds of thousands of jobs lost, due to the present government’s severe restrictions and import tariffs on gold.