Gold Traders Continue To Confound As Jobs Report Boosts Equities Higher

The long, cold lonely winter in jobs growth ended with the April thaw. The U.S. Department of Labor released data today that was pretty much spot on predictions at an addition of 223,000 new jobs created.

Although this would seem to favor a Fed interest rate move, gold traders pushed gold higher in regular trading. A stronger dollar, reflecting the strong jobs report, moved higher and so took some of the wind out of gold’s sails.

Higher interest rates do not bode well for non-interest-bearing precious metals, especially gold. The question is, then, why did traders push gold higher today?

We think the answer lies in previous days’ trading. There was a lot of (unfounded) fear that the jobs report would be spectacularly high. How that would happen escapes us. The U.S. is on a long, modest recovery trajectory.

Some analysts are calling the jobs data a “Goldilocks” report, and in some respects they are correct. The porridge is not so hot that it will force the Fed to raise rates in June, nor is it so cold that the economy in the U.S. is grinding to a stop in the near future.

As if to underscore the equivocal nature of the report, U.S. bond yields are down, although slightly. The dollar was stronger, although it scarcely is going to make your European trip cheap in broad terms.

Oil rose modestly, despite that dollar strength, West Texas Crude rising about a half a percentage point, although Brent North Sea, the world benchmark price, was slightly off. That was due to British pound strength on the back of the Conservative landslide in yesterday’s election in the U.K..

Oil should come under some pressure next week as Saudi Arabia intends to implement a ceasefire in Yemen. For gold traders, though, oil is no longer the consistent outside market factor it once was.

The Dow jumped 1.5%. The S&P 500 was up 1.25%. NASDAQ was the straggler in the U.S., rising only 1%.

Hiding in the jobs report today was a downward revision of March gains – to a measly 85,000. Like many gold investors and analysts, we’re hard-pressed to see from what data the rate rise would originate. Data doesn’t support a hike right now and may not support it until September, if not December.

However, that does not mean there won’t be a considerable fear factor afoot in the market.

For a moment, let’s portray the nature of gold’s recent range in anthropomorphic terms, rather than technical terms. Common sense and a cold look at facts drive gold higher (a later rather than sooner Fed rate hike) and fear that the rate hike is coming in June drives it lower. Regardless, ultimately data drives the market.

There’s the push and pull of it.

Wishing you as always, good trading,