Labor Stats Release Tomorrow Sends Money to Sidelines Today

Regular trading in gold and silver came back to life today. It could not, however, push hard enough against the strengthening of the U.S. dollar, which, when all is said and done, is the key component in markets.

Gold is off about $4.00 and silver 5 cents in mid-afternoon trading. ($1.40 and 4 cents respectively at close)

The U.S. dollar is up against the euro by approximately 0.75% and against the yen by 0.25%. Of course, the decline of the euro and rise of the dollar pushes gold prices down. The decline of the yen portends something quite different.

Movement to the yen usually signals haven demand. Obviously then, movement away from the yen is a retreat from haven plays.

While we are discussing havens, let us note that the U.S. 10-year bond yield declined to the 1.75% range, another indication it should be a risk on day in equities.

We have precious metals, currency markets and bonds shouting out risk on. But…

West Texas Intermediate, which had touched $46 per barrel, fell back from those highs and is now trading at about $44.50 at 3PM in New York. At regular closing, WTI was up 1.23%.

That stymied U.S. equities from moving anywhere. The three major indices are essentially unchanged with a miniscule downward bias. Europe and Asia were also mixed to down.

So, we did not have a true risk-on day in equities except in a couple of bright spots.

Everyone across the globe seems to be waiting for tomorrow’s April jobs report from the U.S. Department of Labor.

The ADP private report yesterday showed a soft 156K growth in jobs. Some experts are questioning the accuracy of that reading and its predictive power in the larger employment picture to be released by the government.

Some experts – most notably Goldman Sachs – are calling for 240,000 new jobs in April. That might be stretching it, although they have solid reasons, mainly because the Institute for Supply Management has declared there was an expansion of employment in their diffusion index to 53. March showed a reading of 50.3. A number above 50 shows expansion, below shows contraction.

There has also been chatter from some Fed members that the first quarter of the year was a fluke and real general economic expansion is proceeding apace at a decent clip. This talk led to speculation that the Fed might still be raising rates three more times this year.

That’s loose talk and should stop. Until the world’s major economic geo-regions are all hitting on all cylinders, no one should raise rates, except Japan, which backed itself into a negative rates corner.

The VIX mirrored this wait-and-see sentiment, inching up less than a tenth of a percent. Let’s see what the volatility index does tomorrow after the jobs numbers are released.

Wishing you as always, good trading,