Gold Suffers At Hands Of Resurgent Dollar

Data released today by payrolls processor and survey-maker ADP showed that the U.S. private sector added 179,000 jobs in July, more than experts predicted. That gave the U.S. dollar gave the dollar a middling-to-strong boost.

The dollar is up about 0.60% against the euro and 1.55% against the yen, which has been a bit top-heavy. Japanese financial officials also tried to talk down their currency today, which accounts for the significantly great gain of the dollar against the yen.

The stronger dollar in turn handed gold almost all of its losses on the day. Gold was down about $5.00 in late afternoon trading. Silver, which seems to be getting sucked into more volatility, is down nearly 1.00% on the day.

The dollar’s gains allowed the greenback to recover from six-week lows hit on the Tuesday session. Some investors are sitting out, waiting for the full employment picture that will be presented by the U.S Department of Labor Friday morning. The data released then might have an effect upon the next round of interest rate hikes, possibly in middle-late September.

Right now, the CME’s FedWatch Tool puts the probability of an interest rate hike in September at 18%, up from the 12% quoted yesterday. We think that inflation is still the stumbling block to a rate hike, although one would think that higher employment would generate higher prices at some point.

Crude oil’s rise of nearly 4.00% seems to have had almost no effect on U.S. equities, although all three major indices seem poised to end in the green, however marginally, as of 4 PM in New York.

The culprit seems to be an enormous and unexpected draw down on gasoline stockpiles, 3.3. million barrels down versus a forecast 200K barrels. However, U.S. oil inventories rose healthily last week, so we could see some seesawing as those numbers work through the heads of analysts.

Asia and Europe were mostly off on the day with Shanghai and the DAX only slightly up against big losses in Tokyo and Hong Kong. The FTSE and French CAC were down just a touch.

So we are left waiting for the data release come Friday. Not much happened after Tuesday’s data dump concerning spending and income in the U.S.

The Commerce Department report told us that personal consumption, which measures how much Americans spent on everything from haircuts to cars to popcorn to footwear, increased 0.4% last month from May. Economists surveyed by The Wall Street Journal had predicted a 0.3% gain.

Wishing you as always, good trading,