The equity markets are pointing higher this morning with the various jobs data released this morning indicating a firmer labor market in the U.S. in February. Not only did U3 unemployment fall to a 6-and-1/2-year low of 5.5% but non-farm payrolls came in far above expectations (295,000 new jobs vs. 230,000 expected). The precious metals were all significantly lower after the news: gold led the way, $22 lower at $1,175/oz; silver slipped below $16/oz; and platinum was off $15, down to $1,165/oz. Although palladium was down $5, it remained fairly steady around $825/oz.
Yesterday in the Markets
Wall Street was in the green across the board Thursday, recovering from a dip earlier in the week. The Dow Jones remained strong above 18,100, the S&P 500 closed right around 2,100, and the Nasdaq inched back up near 4,980 after hitting 5,000 earlier in the week. 10-year Treasury note yields fell to 2.19%.
Factors Affecting Gold Today
Much of the job growth during February was in the leisure and service industries. For some perspective, the labor participation rate actually dropped 0.1% to 62.8% and the broader U6 unemployment measure came in at 11%. Wage growth also still lagged behind in spite of the increase in employment, partly due to inflationary pressures remaining soft.
In other news from the U.S., Apple, Inc. will be replacing AT&T on the Dow Jones Industrials, which is expected to give a bump to the benchmark stock index. Apple had previously traded on the Nasdaq.
The Federal Reserve performed a series of “stress tests” on the nation’s banking system yesterday. The central bank concluded that all 31 of the country’s biggest banks (holding $50 billion or more) had “passed” the test, and would be able to survive an acute banking crisis if such an event occurred. Some find this evaluation dubious, and remain skeptical about the health of U.S. banks in general. It also comes at a time when regulatory capture is a concern; the New York Fed has recently been stripped of its supervisory role over other U.S. megabanks, indicating there is some doubt about the structural (and ethical) stability of the system.
The drop in precious metals can also be owed to the announcement yesterday by ECB President Mario Draghi about the finer details of the stimulus plan being rolled out by the central bank. European shares are rising on the news, while trading volumes in gold are very low in Europe. The euro weakened, falling below $1.09, but that was to be expected with the introduction of quantitative easing. European investors are also seeing renewed strength in the German economy, which saw construction rise due to a mild winter. Overall, eurozone GDP grew by 0.9% in 2014.
The first big economic news in the U.S. next week comes in Tuesday, when the JOLTS (Job Openings and Labor Turnover Survey) report is released.