Gold Can’t Find Its Way While Yen Charges On As Safest Haven

U.S. economic data is putting us in a quandary along with the Fed, Fed watchers, analysts and traders around the world.

Today’s figures and one international development added more fuel to the confusion fire. The outcome? We do not believe the FOMC will raise overnight rates come June 15, less than two weeks from now. Of course, we have been saying that for some time.

A weaker-than-anticipated ADP National Employment Report released today shows private payrolls increased by 173,000 last month slightly missing estimates of the 175,000 new jobs predicted by economists surveyed by Reuters. We would call the number “in line with expectations” but it is nothing to write home about and does carry a faint whiff of a slowing economic machine.

That led speculators on the CME’s Fed Watch betting boards to lower probabilities that there would be a rate rise to roughly 20%. Tomorrow we will hear from the Department of Labor concerning overall job creation.

Likewise, the VIX or Volatility Index remained quite subdued.

The European Central Bank edged up its inflation forecast by a whisker for 2016 but predicted price growth would remain well below target through 2018 as Europe struggles with cheap energy forcing lower prices of other goods and services.

The ECB also seems intent on keeping the status quo regarding interest rates and paper buybacks for some time. An expansion of the ECB’s QE is scheduled to begin on June 8. It will include the purchase of corporate bonds.

This overall comprehension of conditions in the EU sent the dollar up against the euro. That, in turn, sent gold down marginally on the day, although there was some positive movement in regular trading action.

As we near 4PM in New York, gold is trading down about $1.70 per ounce. As we conveyed above, the yen seems to be the haven play of choice today. It is up another 0.65% against the greenback.

Crude reacted to news from OPEC ministers meeting in Vienna, but finally is ending the day essentially unchanged.

The general outcome of the meetings can be characterized by the Saudi statement that said the main cog in the oil wheel did not want to see any “artificial ceiling” on production.

Saudi energy minister Khalid al-Falih said that he felt the oil market is in good shape. He added: "The market is balancing. Trends are all good in terms of supply and demand. Prices have recovered somewhat and I believe they will continue to recover.”

Expect tomorrow to be a bit bumpy with the full U.S. employment report due. More temporal volatility will affect markets as we draw closer to the Fed meeting.

Wishing you as always, good trading,