The gold market is moving higher in early action Friday as markets digest the latest jobs data. The September non-farm payrolls report released earlier today showed weak job growth. The country added just 194,000 jobs for the month while consensus estimates were calling for an additional 500,000 jobs raised. The September figure was even lower than the August figure which saw 235,000 jobs added. The consecutive misses in jobs growth points to a disturbing trend and could keep the Federal Reserve on hold longer than it wants to be.
Whether the Fed actually does begin to taper its monthly security purchases in the months ahead remains a topic of debate. Some data points have pointed to economic strength and recovery while others, such as the jobs data, have pointed the opposite way. Today’s non-farm payrolls data may provide more questions than answers and could set markets up for a period of heightened volatility as the next Fed meeting approaches.
Although today’s non-farm payrolls topline didn’t do markets any favors, the report did also contain some positives. The unemployment rate, for example, declined to 4.8%, falling below estimates for a reading of 5.1%. The disappointing numbers for August were also revised higher by 131,000 jobs. Even July was also bumped up, reaching nearly 1.1 million jobs.
Wage inflation showed further signs of picking up which may be bullish for gold. September wages, according to the report, ticked higher by .6% or $.19. Rising demand for labor coinciding with the recovery from the pandemic have put upwards pressure on wages. The biggest question facing markets now is whether the Fed will follow through on its plans to begin tapering before the end of the year.
Numerous analysts interviewed in the aftermath of the report seem to feel that it was decent enough and that the Fed will announce tapering at its November meeting. Of course, things could change in the meantime and a bad November obs report could also sway Fed votes in the opposite direction.
Fow now, the bears are still in control of the daily chart. That control is now by a thread, however, as a month old downtrend has now been negated. The bulls will need to exhibit some strength and exhibit it soon, however, as a lack of upside may encourage the sellers to keep playing the short side of
the market. The $1800 level remains the next near-term target for the bulls. The bears will look to take prices down to the $1700 area before getting excited. With the market now above the $1750 level, the bulls may attempt to rally prices further. Dollar weakness, stronger crude oil and uncertainty over the Fed’s tapering plans may keep the bulls coming back for more. The upside will not really open up unless the bulls are able to take out resistance in the mid 1830s on a closing basis, however. Until then, the market may simply remain sideways awaiting further inputs.