Friday’s Data Weighing on Gold, Silver

April 1st, 2016 by

non-farm-payrollsThe precious metals market took a hit on Friday after a better-than-expected nonfarm payrolls report. The NFP showed that the economy added 215,000 jobs during March.

At the same time, however, the unemployment rate ticked up 0.1% to 5.0%. This was largely disregarded because the labor participation rate hit a 2-year high. Average hourly earnings also ticked up 0.3% after posting -0.1% during February.

According to analysis by Econoday, “Payrolls by industries show further big gains for trade & transportation, construction and also retail. Professional & business services are also strong suggesting that employers have plenty of jobs to fill. Manufacturing, however, is once again down.”

While this morning’s NFP was the data the markets were most focused on (and it was released early in the morning), there is a slew of other economic data in the U.S. and abroad that could have an impact on trading to end the week.

precious-metalsAs a result of the NFP, spot gold slid about 1.25% while silver fell more than twice as far, proportionally, losing 2.7%. This translated into the gold price shedding $15 to about $1,215/oz and silver giving up over 40ยข to trade just above $15/oz.

More Data to Come

In the U.S., Friday morning also saw the release of the PMI Manufacturing index, the ISM Manufacturing index, the consumer sentiment index, and construction spending for February. (The rest of the data relates to March.)

First, it’s worth taking a look at the important international economic data that was announced in the early hours of the morning.

Most of Europe’s major economies released their Purchasing Manager’s Manufacturing index (PMI) data on Friday. France and the United Kingdom saw sluggish manufacturing activity during March, and the first quarter generally. In contrast, Germany and the Eurozone as a whole both saw a modest uptick in manufacturing. Nonetheless, these PMI signals are still taken as disappointing indicators of sluggish growth.

Meanwhile, the house price information (HPI) report in the U.K. showed that the country’s housing market remains pretty robust.

As the U.S. data came out in the morning, there was marginal growth in manufacturing as measured by the PMI. The ISM Manufacturing index was more encouraging, showing a rise in new orders. Consumer sentiment was mostly flat at 91.0, remaining in line with expectations. Construction spending fell 0.5% from the previous month, at the bottom of analysts’ consensus range of expected numbers. Spending on construction is still up more than 10% year-on-year, though.

Impact on Precious Metals

interest ratesEven though the economic data didn’t help out the dollar very much, it still weighed on the precious metals. Many are taking the NFP report and the related data as reason enough for the Fed to pivot toward a hawkish stance on raising interest rates again. When Janet Yellen signaled that the central bank was prepared to accommodate the markets (a dovish stance), the precious metal prices surged. The situation remains up in the air. Yet each possible indication that rates may rise is taken as a bad sign for the precious metals market.

Friday’s data alone has robbed the momentum of gold futures, as the June contract declined by 1.65% around 10:30 am EST. It should be telling, however, that sluggish performance is consistently being taken as a positive sign. In the long run, gold and silver are still the best possible hedge against a sharp downturn in stocks and the broader economy.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.