Bad Jobs Report, Stocks Hammered, Gold & Silver Down

At the end of last week, gold sank while the price of silver plummeted by a whopping 3% against USD. This was after the latest in a series of reports that showed a cooling in the U.S. labour markets amidst a slow economy. All three major U.S. stock indices declined by at least 1% on Friday, the Nasdaq slumped more than 2% on the day and posted its largest weekly percentage decline since January 2022. This followed a mixed U.S. monthly jobs report that kept the U.S. interest rate outlook unclear.

The U.S. Bureau of Labor Statistics reported Friday that 142,000 new jobs were added last month. Although this may be a positive compared to 114,000 in July, it was a letdown from the expected 161,000.

While the U.S. unemployment rate fell from 4.3% to 4.2% a month earlier, the report is the latest to show the labour market is cooling more than expected under the weight of interest rates currently at 23-year highs. The Federal Reserve’s policy committee will meet later this month, with at least a 25-basis rate cut certain, though pressure may build to cut by 50 basis points. The CME Fedwatch tool currently shows a 55% probability of a 25-basis point cut and a 45% chance for a 50-basis point drop. This makes it a coin toss at this point.

Since March 2020, this month is the first time that the Fed will be cutting short-term interest rates. The speculation around cuts has continued for years and plagued the trading and investment environment. Now we are on the cusp of cuts, which have basically been locked in for this month. Historically, this has been the single most powerful catalyst for gold and silver prices.

Bank of America analysts have just announced that they see a barrage of 25-basis point cuts at the next five consecutive FOMC meetings. This would be potentially more interesting than debating 50 versus 25, as this would be a rapid pathway down to highly inflationary levels.