Gold prices were shaken out of their tight $5 trading range this morning, as the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) revealed an all-time high of 5.87 million job openings in July.
The Federal Reserve pays special attention to the job market when making economic forecasts, and labor slack has been one of their concerns. This morning’s report will raise the possibility of an increase in benchmark interest rates before the end of the year.
Gold had touched a three-week high overnight, in response to yesterday’s ISM non-manufacturing Index coming in far lower than expected. Spot gold is trading $4 lower after the JOLTS report, from near unchanged earlier this morning. Spot silver is down 20 cents, almost 1%.
The JOLTS report did nothing for the dollar, which is trading in an extremely tight range after suffering its worst one-day drop in five weeks yesterday.
Yesterday’s drop in the dollar has the yen stronger, which is weighing down stocks in Japan. The currency pair hit an eight-day low in earlier trading. Oil traders are hoping that Hurricane Hermine helped US crude stockpiles shrink this week. The oil supply picture didn’t get any brighter today, as Apache Corp. announced that it had found a two billion barrel oil reserve in an overlooked area of Texas.
China’s foreign currency reserves are in the news today, as it is reported that the nation’s gold reserves increased by 160,000 troy ounces, bringing its official total to 58.95 million ounces of gold. On the other hand, Beijing’s currency reserves in August fell at nearly quadruple the rate of July’s drop, losing $15.89 billion last month, compared to $4.1 billion in July. The sharp drop in forex reserves was blamed on government intervention in the yuan market, and capital outflows from the country.
The CME Group FedWatch tool was showing a 15% chance of an interest rate hike this month, and a 46.9% change for in increase in rates in December. After the JOLTS report, odds had increased slightly, to 18% for September, and 48.8% for December. FedWatch numbers change throughout the day, based on trades in fed funds futures. While the JOLTS report pushes all the right buttons for Fed boss Janet Yellen, it is countered by dismal non-manufacturing data, and the lower than expected non-farm payrolls report.
Regional Federal Reserve presidents are continuing to beat the rate hike drum, but it seems that Wall St isn’t dancing to that tune.
Yesterday, San Francisco Fed president John Williams gave a speech where he said It “makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later.” Noting that the Fed has little to no room to react to the next economic shock, he said “Time is not on our side.”
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