Gold Soars on Bad US Jobs Data

Friday’s US NFP print has been broadly viewed in the main stream media as anything from “disappointing” to an “unmitigated disaster”. This is exemplified no better than by the commentary from economist Thomas Simons at New York’s Jefferies LLC who said “it’s been years since we’ve seen such an unambiguously bad report”. The following is a brief summary of the main points from last week.

  • September saw only 142,000 jobs created, significantly below the expectation of 200,000 and falling below the lowest estimate. 
  • The August print was revised significantly lower, down to 136,000 jobs from 173,000.
  • The average workweek declined by 0.1 to 34.5 hours 
  • Hourly wages fell slightly which missed expectations of a 0.2% increase. 
  • Weekly earnings fell from $868.46 to $865.61.

This latest NFP print is put into perspective in the chart below. It’s interesting to note that 2015 monthly job growth has averaged 198,000 compared with 260,000 last year.

The reaction to this data could be seen in the gold pricing. During the Hong Kong session, the gold price was actually trading with a downward trend until the release of the NFP print at which point prices went vertical as indicated by the Kitco plot below. Gold finished the Friday trading session at US$1,138, up nearly US$25 from the previous day. Of additional interest is the fact that gold’s 50-day moving average has been convincingly breached to the upside. Silver pricing followed the behaviour of gold.

Conversely, the dollar index closed late on Thursday afternoon in New York at 96.10 and was trading with an upward bias during the Hong Kong session until the NFP print was released at the 96.32 mark. From that point the index plummeted around 110 basis points. End of trade saw the index close at 95.91 representing a fall of just under 20 basis points with suggestions that the Plunge Protection Team had played a hand. The intraday plot below shows the dollar index drop at the time of the NFP print.

Readers will note that just the previous Friday (September 25th) saw a 1.7% surge in gold pricing which was headlined in our news email of that day. This also comes at a time when gold metrics are starting to show regularly healthy signs as we reported in Monday’s news article of last week. At the time we observed that ASX listed gold stocks were one such indicator and yesterday being the first trading day since the NFP print and subsequent gold price surge, similar behaviour could be seen. Newcrest closed up by 9% yesterday and Beadell resources which we’ve specifically mentioned previously closed up by over 10% as a result. It seems reasonable to conclude that gold is increasingly demonstrating its appeal as a safe haven store of value in the context of equally increasing poor economic data.