Labor Markets Tighten, Gold Price Dips

February 1st, 2018 by

Thursday morning saw spot gold slip 0.3% (-$4) to just above $1,341/oz.

Many traders and investors who increased their allocation of gold at the beginning of the year are taking profits off the table. This may be related to short-covering due to recent losses in stocks and bonds.

Spot silver tumbled 17¢ (-0.95%) to $17.14/oz, erasing much of its gains from the month of January.

Platinum lost 0.4% to trade at $996/oz. Palladium reversed earlier gains this morning and was down to $1,020/oz, a six-week low.

As January moves into the rear-view mirror, here’s how the precious metals performed over the first month of 2018 (not accounting for Thursday’s action):

Au: +$41.50 (+3.2%)
Ag: +27¢ (+1.6%)
Pt: +$67.40 (+7.2%)
Pd: -$40.55 (-3.8%)

This represented the best month for platinum in a year.

By comparison, bitcoin prices lost 25% during January, wiping out more than $40 billion in market capitalization.

Employment Data Points Toward Strong Labor Market

Weekly jobless claims were reported on Thursday, showing that new claims fell marginally. However, in a separate report issued by the Department of Labor, worker productivity dropped 0.1% during the fourth quarter.

Although this doesn’t sound like much of a change, it was the first negative reading of productivity—based on output per hour of work—since the first quarter of 2016.

During the previous quarter (Q3 2017), productivity rose by 2.7%. This was a downward revision from the 3.0% gain initially reported.

One encouraging set of data was better wage growth. Hourly wages rose 2.8% year-on-year over the last 12 months. It was the biggest annual increase in employee compensation in a decade.

All told, the labor market remains at its tightest since the 1970s.

Global Markets Quiet After Fed Stands Pat

Yesterday’s FOMC meeting concluded with the Fed choosing to leave interest rates unchanged. The vote was unanimous.

Many observers believe the Fed will be more hawkish with a new incoming chair, Jerome Powell. The change in leadership is also expected to handle financial regulations with a lighter touch.

Global stocks were set to open lower on the first day of February. Wall St recovered some of its losses from earlier in the week during Wednesday’s session.

Shares traded sharply lower in Europe. This was especially true in Germany, where the DAX slumped nearly 1.4%. The FTSE 100 in London was down about 0.5%.

The downward shift for European stocks came in spite of a strong reading for manufacturing activity as measured by the Purchasing Managers’ Index (PMI).

Many parts of the euro region experienced PMIs close to 60.0 for January, speaking to a broad acceleration of growth.

Forex markets showed little change on Thursday. The DXY index slipped less than 0.2% and was back near 89.0.

The two major stock indices in Japan were about 1.7% higher overnight. Shares were mixed elsewhere in Asia.

Crude oil prices jumped 1% in early trading. WTI crude traded back at $65.40 per barrel.

In the bond market, the 10-year yield on U.S. Treasurys touched as high as 2.75% yesterday but was two basis points lower on Thursday.

 

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.