Last Friday, the US Labor Department released the job numbers, and – big shocker – the American economy added fewer jobs than what everybody was expecting. Whereas most economists were expecting the country’s labor market to create 205,000 new jobs (which would have been a welcome boost), April’s job numbers saw an increase of just 160,000 jobs, or approximately 20% lower compared to the estimates.
Sure, an increase in the total amount of jobs added last month is very encouraging, and the fact the average wage also increased does indicate the ratio of higher-paying jobs did increase, but missing the estimates will be tough to explain. On top of that, the Labor Department also had to revise the job creation numbers for both February and March, as the total amount of new jobs in those months was approximately 10% lower than previously anticipated.
And that’s of course something the market is very wary about; if both February and March had to be revised (in a negative way), it’s not impossible the weaker-than-expected April report could be subject to another negative revision. And that’s something the Federal Reserve will have to take into consideration.
Indeed, the central bank had been hinting about hiking the interest rates once again in June, but this weak job report in April might result in re-thinking that strategy, considering the previous months also saw a negative correction in the final job creation numbers. And why would the Fed hike the interest rate anyway, after seeing the weakest job creation numbers since September?
Was April just a bump in the road? Or is it a sign of a slowing momentum on the job creation market? One thing is for sure, despite all the positive news releases lately, it’s way too early to increase the interest rates again, especially when you realize the economy grew at a 30% lower pace than expected in the first quarter of the year, so no, the US economy isn’t back on track just yet.
Or why do you think the gold price moved sharply higher when the bad job results hit the wires?
Indeed, the gold traders didn’t waste a second and saw right through the positive headlines and immediately pushed the gold price higher by almost $15/oz. It took the gold market a few attempts to break through the resistance level at $1280, but that finally happened last week as we ended the month of April above this resistance level, just a few weeks after the gold price took a breather after a $200/oz run. Not only was this break-out confirmed last week as the $1280 (support) level was repeatedly tested but never broken and the closing price of roughly $1290/oz on Friday is the second week in a row the gold price did close above the $1280 level, and that’s quite a bullish signal!
And even though we do expect the gold price to remain quite volatile in the next few weeks, the Money Flow Index shows there’s definitely a potential to see the gold price running higher in the near future and even the RSI isn’t showing an overbought situation just yet.
We have been pounding the table for quite a while now, and our patience has been rewarded. Gold is now trading almost $250/oz higher than where it was trading at the last trading day of the previous year, so we are quite happy with this performance. And as the US government institutions are now releasing more negative results, gold is reconfirming its status as safe haven after breaking through its resistance level which now paves the way for a further run.
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