Gold Pushes to Rally as Employment Data Disappoints

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The big news today governing fundamentals was the fair-to-middling jobs report issued by the U.S. Department of Labor.

While 151,000 new jobs number is not awful, it’s a low enough number that it’s safe to say that the September meeting of the FOMC will not bring forth an interest rate hike. However, it is very curious that the CME FedWatch probability index that covers potential rate changes went only from 24% to 21% and did not fall into the single digits.

We are thinking that the stable, low interest rates, which will last until December, will engender somewhat of an equities bull market once the Labor Day holiday is over up until the December Fed meeting. This is in spite of the fact that the VIX is lower today, an indication that stock will be quiet. Let’s see what happens after everyone is back full time on Wall Street.

The U.S. dollar strengthened on the employment news, and that affected the price of gold and silver, as well as that of energy. Spot gold is up about 0.85% and silver is up 2.80% despite being nicked by the more robust dollar.

West Texas Intermediate completely shrugged off the strong greenback and bounced up a healthy 3.25% after lunchtime in New York. However, it lost momentum as the weekend approaches and traders back out of trades or square positions so they can take their holiday in worry-free mode. In late afternoon, WTI was up 2.65%.

Oil is in its own ongoing “will she or won’t she” whipsaw experience. The question is whether the partnership between OPEC and large-non-OPEC producers can generate a production and/or price support agreement. On top of that, those producers have to be concerned with a gradual but inexorable rise in the U.S. rig count. It has been up nine of the last ten weeks.

Price was also up today on jitters about any long term affects that Hurricane Hermine might leave behind. That factor will have disappeared when trading resumes on Tuesday.

OPEC and its posse have meetings scheduled for late September and then again on November 30. We would not look for any price/production level resolution until November, if then.

U.S. equities moved up for most of the day before swooning a bit as effective trading started coming to a close due to the holiday. Volume began plummeting in mid-afternoon and continues to shrink.

A last word on August employment data. August is the most extremely revised month when it comes to employment reports. Historically, when revisions are published two months from now, if history is a guide August should show about a 70K improvement.

Finally, it might be noted that the 10.5 million jobs added during the Obama administration’s 7.5 years are only slightly fewer than the number added at this point under Ronald Reagan’s administration. The Clinton administration was the champ, adding about twice as many at this point than either Reagan or Obama.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer