Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Did Strong December Payrolls Push Gold Prices Up?

Commodities / Gold & Silver 2019 Jan 08, 2019 - 04:55 PM GMT

By: Arkadiusz_Sieron

Commodities

December payrolls were strong – but gold prices rose. What happened?

Job Creation Surprises Positively

U.S. nonfarm payrolls accelerated in December, beating expectations. The economy added 312,000 jobs last month, following a rise of 176,000 in November (after an upward revision) and significantly above 182,000 forecasted by the economists. The number was the biggest increase since February 2018. On an annual basis, the pace of job creation increased slightly last month to 1.8 percent.

What is important is that the gains were widespread, but the most impressive expansion occurred in education and health services (+82,000), leisure and hospitality (+55,000) and professional and business services (+43,000).



Moreover, the strong headline number was accompanied by significant positive revisions in November and October. With those, employment gains in these two months combined were 58,000 higher than previously reported. In consequence, after revisions, job gains have averaged 254,000 per month over the last three months, or 220,000 over the prior 12 months.

The chart below summarizes the US nonfarm payrolls over the last five years, showing both monthly and yearly changes. As one can see, the annual pace of job gains has been in upward trend since the fall of 2017, while the monthly gains are significantly above the level that would keep the unemployment rate in check and would please the Fed. Hence, the current economic expansion still has plenty of steam despite growing worries about the slowdown. It is not a good news for the gold bulls.

Chart 1: Monthly changes in employment gains (red line, left axis, in thousands of persons) and total nonfarm payrolls percent change from year ago (green line, right axis, % change from year ago) from December 2013 to December 2018.

Unemployment Rate Rises – And It’s Good

Wait a minute. You wrote that “the monthly gains are significantly above the level that would keep the unemployment rate in check,” but the unemployment rate rose from 3.7 to 3.9 percent in December, as one can see in the chart below.

Chart 2: Unemployment rate (red line, left axis, in %) and the average hourly earnings (green line, right axis, in %) from December 2013 to December 2018.

However, the jobless rate increased because more people entered the workforce. The labor force participation rate rose from 62.9 percent in November to 63.1 percent in December. It’s a good sign, as it shows that people who were previously outside the labor force now think work is easier to find and start to look for it. What is also important is that the number of long-employed people, workers employed part time for economic reasons and discouraged workers dropped from the year ago.

Moreover, the tightening of the labor market has also given workers more bargaining power over the wages. The average hourly earnings for all employees on private nonfarm payrolls rose by11 cents to $27.48. It implies that they increased 3.2 percent over the prior twelve months, slightly faster than last month, as the chart above shows. Rising wages should strengthen the hawkish camp among the Fed, recently less visible.

Implications for Gold

The December edition of the Employment Situation Report was strong. The payrolls surprised the analysts on positive side, and were significantly above the level needed for a gradual tightening of the labor market. The unemployment rose, but only because more people entered the labor force, which is good for the economy. Last but not least, the wages continued to grow relatively fast.

All that means that that the reports about the death of the US economic expansion have been greatly exaggerated. The American labor market remains healthy, while inflation is under control. Hence, the FOMC should stay on track to continue gradually raising interest rates. The US will eventually fall into recession, but the December employment report confirms our fundamental analysis, included in the January edition of the Market Overview, that this isn’t going to happen anytime soon.

Gold should struggle, then. Instead, it rallied in January. As the chart below shows, it even jumped shortly above $1,290 yesterday.

Chart 3: Gold prices from January 6, 2019 to January 8, 2019.


What happened? Well, on Friday, Powell suggested that the Fed may become more dovish this year. He said that “with the muted inflation readings that we’ve seen, we will be patient as we watch to see how the economy evolves,” and that “we will be prepared to adjust policy quickly and flexibly and to use all of our tools to support the economy should that be appropriate to keep the expansion on track.” In plain English, it means that Powell capitulated to the financial markets and introduced the put. He gave them the message they wanted, raising the possibility of a pause in the Fed’s gradual tightening in response to downside risks and turmoil in the stock market. It should support the gold prices for some time, especially in January, which has been typically positive for the yellow metal.

Thank you.

If you enjoyed the above analysis and would you like to know more about the link between the U.S. economy and the gold market, we invite you to read the August Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron

Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules