Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022
Quantum AI Tech Stocks Portfolio Current State - 4th Jan 2022
The Alibaba Stock Market - 4th Jan 2022
Will Gold & Silver Be Investment Outcasts in 2022 Again? - 4th Jan 2022
Stock Market Happy 2022 Entry - 4th Jan 2022
Complete paradigm shift will make Gold the generational trade - 4th Jan 2022
Corsair MP600 NVME2 1tb Drive Sudden DEATH Failures - Back Up NOW! - 4th Jan 2022
AI Tech Stocks Portfolio Updated Buying Levels and Zones Part 2 of 2 - 3rd Jan 2022
Stock Market Sentiment Speaks: 2022 Can Be Your Best Year Ever - 3rd Jan 2022
2020-22 - Soaring costs of the West's Pandemic failure - 3rd Jan 2022
AUTODESK (ADSK) - CAD - Metaverse Stock Analysis Investing for 2022 and Beyond - 2nd Jan 2022
Stock Market Sector Themes In Play For 2022 - 2nd Jan 2022
Excuse Me Mr Gold. What Year Is It? - 2nd Jan 2022
Stock Market Early 2022 Should Continue Melt-Up Trend In January / February - 2nd Jan 2022
UK Energy Crisis WARNING 2022 - How to Avoid Huge Increase in Gas and Electric Fuel Bills Right Now! - 1st Jan 2022
Why You Need A PR Expert For Your Financial Startup - 1st Jan 2022
TENCENT- Chinese High Risk GAMING Metaverse Stock Analysus for Investing 2022 and Beyond - 31st Dec 21
Gold Price Forecast 2022 - The Golden Year - 31st Dec 21
Will 2022 Be Better for Gold Than 2021? - 31st Dec 21
Gold Stocks – Wishing And Hoping (And Losing) - 31st Dec 21
Sheffield Christmas Market 2021 SANTAS GROTTO at Peace Gardens, City Centre Sights and Sounds - 31st Dec 21
Nvidia Leaves planet Earth - AI Tech Stocks Analysis - 30th Dec 21
Google (Alphabet) AI Tech Stocks Analysis - 30th Dec 21
Stock Market Santa Rally Challenge - 30th Dec 21
Sheffield Christmas Market Stalls, Sights and Sounds 2021 - 30th Dec 21
Investment Roadmap for 2022 - 30th Dec 21
2022 – The Year of (Gold) Inflation? - 30th Dec 21
Overvalued Stocks and Housing Perfect Storm for Gold - 30th Dec 21
My Most surprising Crypto call to date - 30th Dec 21
What is a Rehab Clinic and How It Is Beneficial for People? - 30th Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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