Gold Pushes to Rally as Employment Data Disappoints

September 2, 2016 - 5:36pm

 by Gary Wagner

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

Gold Forecast: Proper Action

This morning just following the release of this month's jobs report data we sent out a trade recommendation to enter long positions in both gold and silver.

Maintain your current long gold at 1328 (Dec comex), 1324 (spot)

Maintain your current stop below 1305 (Dec Comex) 1301 (spot)

Maintain your current long silver at 19.17 (Comex) 19.11 (spot)

Maintain your current stop below 18.50 (Comex) 18.41 (spot)

Gold Market Forecast

An interesting week, and most interesting conclusion not only to the week but to the summer, as this month's jobs report data is released.

Like Goldilocks as she found that perfect bowl of porridge which was not too hot and not too cold, today's jobs numbers were not strong enough to instigate a higher probability of an interest rate hike in September, yet not so weak as to summon real concern in terms of the economy's strength.

Our economy continues to grow, robust in many sectors, but with the underlying characteristic of slow growth.

That being the case, US equities were able to rally, as was the precious metals complex. On today's video report we will detail our current trades in both gold and silver. We will begin to discuss our exit strategy and upside targets for our trades on Monday.

Trending Markets Forecast

A most interesting conclusion to this week's activity in US equities markets, which had been trading in essence sideways to slightly lower.

The jobs report data came in well under expectations. Whereas expectations were that we would add about 180,000 new jobs and the unemployment rate would drop to 4.8%, the actual numbers were 151,000 new jobs with the unemployment rate remaining steady at 4.9%.

The interesting conclusion is that even with a lower-than-expected number of jobs created, US equities staged a moderate rally moving back near record highs. The jobs report in essence alludes to the fact that we continue to have an economy that grows, although the growth itself is extremely tepid.