Yesterday’s ADP private sector payroll report proved to be an accurate forecaster, as the U.S. Bureau of Labor Statistics announced that 288,000 new jobs were created in June.
The unemployment rate dropped to 6.1%, as the labor participation rate remained at an abysmal 62.8%. Less than 2/3 of eligible workers are employed, or actively seeking work. The rest have given up looking for a job.
There’s 315,000 extra people looking for jobs, as first-time unemployment claims rose by 2,000 people last week.
Gold, which has already seen some anticipatory short-selling, fell on the news, as the dollar shot up from multi-month lows to finally break over 80 on the DXY dollar index.
Precious metals had been in a holding pattern yesterday, awaiting this morning’s non-farm payrolls report. Analysts had been warning all week that very light volume in both equities and commodities would mean that individual orders would move the indices more than normal.
The New York Stock Exchange and NASDAQ both close at 1pm today, and will be closed tomorrow for the July 4th weekend. The COMEX commodities exchange will shut down at 1:30pm, and the bond market will close at 2pm. European and Asian markets will be open through Friday.
The European Central Bank stood pat today, after last month’s big policy changes. The was pretty much expected. European stocks are up in late trading, buoyed by the U.S. jobs report.
Wall St. opened higher on the jobs numbers, but Treasury yields climbed. Some traders believe that the Fed may end up raising interest rates earlier than expected if the economy continues to improve. This is part of the reason for gold’s dip this morning as well. However, Fed Chair Janet Yellen’s testimony before the IMF yesterday has other analysts believing that she will deliberately let inflation overshoot 2% before considering a rate hike, and will end up playing catch-up to inflation for an extended time. This will keep short-term real interest rates low (or even negative), which reduces the short-term opportunity cost for holding gold.
Yellen also declared that the Fed would not adjust monetary policy to fight asset bubbles and excessively risky behavior by banks and investors, even though it is the Fed’s monetary policy that is encouraging that behavior. She said that it was the responsibility of regulatory agencies to clean that up (an unlikely occurrence, since the agencies are run by ex- Wall St bank officials.)
Speaking of regulators and gold, Members of British Parliament asked the head of the nation’s top financial regulator to launch an investigation into gold manipulation. The chief of the Financial Conduct Authority said that, while manipulation was possible, there were no evidence of it occurring (He apparently missed the memo where his own agency convicted a Barclays trader of manipulating the gold fix.) In any case, he said, the FCA did not have the authority to investigate precious metals price manipulation. Perhaps the Parliament should do something about that?
Demand for paper and physical gold is on the rise. The Perth Mint of Australia reports that gold sales are at a four-month high, with 39,405 troy oz sold in May. The SPDR gold ETF saw assets grow by 1.4% in just two days this week, the biggest two-day jump since 2011. SPDR holdings are up 8% for the year, after seeing 550 metric tons of outflow in 2013.