Gold closes lower on the heels of weaker than expected jobs report - an oxymoron?

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On the surface, a much weaker than anticipated jobs report was perceived as an underlying bullish factor in gold. However, today gold closed lower, giving back early gains as market participants digested today’s additional jobs added in September. In the case of today’s decline in gold pricing, it is only an oxymoron if you don’t look at the complete picture because the devil is in the details.

Today the Labor Department reported that the additional new jobs added in September were dismal and exceedingly below forecast by economists. Only 194,000 jobs were added last month, with forecasts ranging from an additional 450,000 to 500,000 new jobs created in September. These forecasts come from poles created by Reuters and Dow Jones.

MarketWatch reported that “The increase in hiring fell well short of Wall Street’s forecast, exacerbated by a decline in employment at public schools. Economists polled by The Wall Street Journal had forecast 500,000 new jobs.” The article in MarketWatch also stated that “The tepid September jobs report adds to growing evidence the recovery has slowed, but it probably won’t deter the Federal Reserve from announcing plans soon to start to wean the economy off its easy-money strategy.”

In other words, with such a tepid report not only below the numbers released in August 2020 but significantly below estimates, it would be logical to expect this fundamental data to have a moderate to strong bullish impact on gold pricing. This is because it would allow the Fed to begin tapering later than sooner. However, just the numbers from September are not the complete picture and not why gold could not hold onto early gains.

The reason gold closed well below the earlier gains after the jobs report was due partly to the government revised estimates in August. Originally the Labor Department reported that 235,000 jobs were added in August, which is now updated to 332,000 jobs. Add to this fact, a government report released yesterday revealed that the jobless claims in the United States have declined by 38,000 and are currently at 326,000. This is also a sign that the economic recovery continues to gain momentum. The net result of these factors has allowed the unemployment rate in the United States to decline from 5.2% to 4.8%. This is the lowest unemployment rate since the beginning of the pandemic.

All of these numbers allude to but certainly don’t jump out of the page is the problem our economic recovery is plagued with, a large number of individuals who do not wish to return to work for one reason or another.

The inability for companies to hire their needed workforce coupled with obtaining the supplies needed has resulted in goods and services costing more. This is one of the primary reasons we have seen the largest inflationary increase in the United States over the last 30 years. It was believed that when the additional Federal unemployment benefits ran out in September, there would be a rush of these formerly unemployed individuals to seek gainful employment. However, it remains difficult for companies to find even though they have been offering higher pay.

While the 11 million individuals unemployed have now contracted to approximately 5 million people, that number is still well below the employment levels prior to the onset of the pandemic.

The chart above labeled chart 2 is a 15-minute candlestick chart. It is clear to see what happened immediately following the jobs report’s release, which occurs early on Friday. The arrow under the number eight signals the beginning of Friday. You can see that gold ran from $1758 to a high of $1782 in the first four hours. However, in the next 1:15 hours gold prices fell from $1782 down to $1755.60

Wishing you, as always, good trading and good health,

Gary S. Wagner - Executive Producer