The gold market is surging higher following the latest jobs data which showed a dramatic miss. The non-farm payrolls data for August showed just 235,000 jobs created with an unemployment rate of 5.2%. The jobs created figure was a major miss from consensus estimates which were looking for some 720,000 jobs created. The data may give the Federal Reserve much to consider as it continues to think about pulling back on its stimulus measures.
Not only was the poor data a positive for gold, but wage inflation figures also crept higher. Wages rose by .6% in August while estimates were looking for a rise of .3%. The data is poor but bullish for gold and could keep the Fed from a September taper announcement. The poor jobs figures could be a result of the ongoing viral pandemic, demonstrating how much of an impact the Delta variant is having. With the pandemic having such a strong influence on the economic recovery, it is difficult to imagine a scenario in which the Fed does announce a tapering plan this month. The poor jobs data may have pushed such an announcement into early next year at the earliest.
Adding to gold’s bullish behavior today is a weaker dollar. The Dollar Index is still above the 92 level, although the currency is in the middle of a multi-month downtrend that is getting close to breaking major support. A breakdown below the 92 level, on a closing basis, could set the stage for a rapid and dramatic leg lower that could see prices decline down to the 90 level in short order. As the dollar weakens further, gold is likely to catch a bid as it often moves in the opposite direction of the dollar.
Adding to gold’s bid is the decline seen today in the services sector. The Institute for Supply Management said today that its non-manufacturing index showed a reading of 61.7%. This was basically inline with expectations of a 61.9% reading, but over two points lower than the previous month’s figure.
The recent data trend may keep the Fed’s feet on the gas pedal and could put off any tapering for several months or more. This may, in turn, keep the dollar under pressure while also boosting gold and other hard assets.
Despite its strong gains on the session, the gold market has not been able to break through resistance in the $1836 area as of yet. The market is right there, however, and the first few sessions of next week have the potential to see some dramatic upside price swings if the bulls come together. A failure at current levels could be indicative of doubts about any Fed tapering delays and could pave the way for further downside as the bulls throw in the towel. With so many bullish factors, however, it would seem that the smart money is betting on more upside and that the gold market could test all-time highs in the months ahead.