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Gold Loses Out to Stellar U.S. Jobs Report

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The first print of July employment data shows an extremely strong labor market, one that can see sustained growth for some time, and one that just might be the harbinger of meaningful inflation in the near future.

The 255,000 new-jobs figure is impressive enough. Beyond the raw numbers though, we are seeing big, important details.

Before continuing, though, we have to note that gold took a $23 loss on the day, a loss that issued both from a stronger U.S. dollar and from regular trading. The strong dollar accounted for about 25% of the loss.

The published unemployment rate was flat at a relatively low 4.9 %. This number has been fairly much a constant namely because of the continuing rise in the number of Americans looking for work and finding it. They are then replaced with new candidates as employers dig deeper into the labor pool.

“This was everything you could have asked for, maybe more,” said Michelle Meyer, head of United States economics at Bank of America Merrill Lynch. “We’re seeing new entrants into the labor market, which implies a longer runway for the business cycle.”.

“It’s been a really good summer for hiring all across the country,” said Tom Gimbel, chief executive of LaSalle Network, a recruiting/staffing firm based in Chicago. “Business has been great. Kids coming out of college are getting hired, and we’re seeing a lot of activity in the $50,000 to $150,000 category.”

Those latter two numbers will certainly add to inflation should that kind of hiring stay broad and deep.

We imagine that there will be a more vigorous debate within the walls of the Fed as we draw closer to the FOMC’s meeting in middle-late September.

The measure of volatility, the VIX Index, fell into the low 11.00 range, down about 9.00% on the day.

The S&P 500 and the NASDAQ are on course to close at record highs. The S&P is at 2180, the NASADQ at 5219. The Dow did not approach that rarefied air because crude oil fell today after showing strength in the last two sessions. That injected much uncertainty into the oil patch, which bled over into the energy-heavy Dow Jones Industrial Average.

European equities seemed to enjoy the U.S. employment news more than New York did, with the DAX and CAC up 1.35% and 1.50%, respectively. The London FTSE was less exuberant but was up smartly, nonetheless.

With an eye toward a more probable interest rate hike come September, the 10-year bond yield rose 0.08%, closing in on 1.60%.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer