An unbelievable jump in non-farm payrolls caught the markets by surprise this morning. The Bureau of Labor Statistics reported that the U.S, economy gained 312,000 jobs in November, compared to expectations of 230,000 positions gained.
The news caused the dollar to jump to a five-year high of 89.34 on the DXY index, and sending the yield on 10-year Treasuries spiking to 2.68%, on expectations of an early rate hike by the Fed.
This of course put pressure on gold, puling it down below $1,200 an ounce. Silver was drug down with gold, losing 15 cents in early New York trading. Platinum gave back yesterday’s gains, while palladium is up marginally.
Wall St jumped at the opening bell, then began oscillating wildly, while keeping in positive territory.
Yesterday in the Markets
The European Central Bank decision to push back bond-buying stimulus until next month at the earliest was the big economic news yesterday. Stocks closed lower, as Treasuries strengthened and the dollar lost ground vs the euro. The yield on the 10-year T-note dropped 4 basis points to 2.24%. Gold and silver were down modestly, but gold held above the $1,200 mark to close at $1,206.50. Platinum was up over 1% to close at $1,235.00, while palladium saw marginal losses.
Crude oil futures slumped again, with the $70/bbl mark a distant memory for West Texas Intermediate, closing at $66.78/bbl.
Thursday’s closing numbers:
Economic News Affecting Gold
While the big news is the eye-popping non-farm payrolls report, the Saudis show that they are dead serious about defending their global share of the oil market by cutting prices to Asia and the U.S. Their goal is to force shale oil and fracking operations to close, by keeping oil prices under their production costs. Many of these companies issued high-yield bonds (junk bonds) to finance operations, and will have trouble meeting their debt obligations with oil under $70 a barrel. Speaking of debt obligations, the plummeting ruble and swooning gas prices led to the yield on the Russian 10-year note to spike 80 basis points to break over the 12% mark.
Regarding the jobs report, the government says that unemployment came in at 5.8%, and the U6 unemployment rate (the one the government used to use, before it got too high) dropped a tick to 11.4%. The U.S. trade deficit narrowed slightly, as both imports and exports rose. (Thank low gas prices for imports not being higher.) The trade deficit came in at $43.4 billion, while experts had expected the gap to close to $41.2 billion.
Did you think that last year’s physical frenzy for gold after the huge price drop was a one-off event? China doesn’t think so. The Shanghai Gold Exchange has already broken last year’s record sales, with all of December yet to go. December is a busy month for gold in Asia, due to its prominent role in Chinese New Year celebrations.
India, which lost its crown as “world’s largest gold consumer” to China last year, hasn’t lost its love for the yellow metal either, despite extreme restrictions to its import. The Times of India reports that gold imports for November hit a 41-month high in India.
Geopolitical News Affecting Gold
President Obama is expected to announce his nomination of Ashton Carter this morning to be the new U.S. Secretary of Defense. Carter is seen to be more “on board” with Obama’s plans for toppling the Assad regime in Syria. Some Republicans in Congress want to threaten another government shutdown, to force Obama to rescind his executive order delaying the deportation of some 4 million illegal immigrants. Speaker of the House John Boehner does not want more bad press for the GOP, and has vowed to reach across the aisle to Democrats to short-circuit any attempts at a shutdown. The resolution that temporarily funded the government during the mid-term elections expires next Thursday, so get ready for politics to dominate your TV news.
Japanese GDP is released on Sunday, as elections loom in the Land of the Rising Sun. Parliament was dissolved and snap elections called by Prime Minister Abe, who wants to strengthen political support for his massive “Abenomics” stimulus and quantitative easing program.
Wall St. will also wake up to German industrial production numbers, and Chinese merchandise trade balance reports.