Friday, July 5, 2013

Gold market report: gold down on upbeat US jobs data

by James Hickling

Better than-expected US jobs numbers have sent the dollar higher (the Dollar Index at a three-year high of 84.50 as of writing) and gold and silver lower. The Labor Force Participation Rate also ticked up for the month, though as the chart below – courtesy of ZeroHedge – makes clear, in multi-decade terms we’re still at distinctly unimpressive levels as far as this particular measure is concerned. Unemployment remains at 7.6%, though the underemployment rate rose from 13.8 to 14.3%.

Labor Force Participation Rate

Stocks have also risen, while US Treasury yields have shot higher on expectations that this report will lead to “tapering” from the Fed sooner rather than later.

The Fed may slow its purchases of securities later this year; though it’s worth remembering that jobs data is a lagging indicator. And with money supply growth in the US stalling, signs of a serious slowdown in China and emerging markets, and the eurozone expected to contract this year, this could prove to be the high-water mark of the current economic cycle. Moreover, the US economy and banking sector cannot shoulder a significant rise in interest rates, so the Fed cannot get too hawkish as far as quantitative easing is concerned.

All of this – combined with the relative strength in the dollar versus other currencies – suggests that Bernanke and his successor will continue to err on the side of loose monetary policy, with all the implications for the absolute value of the dollar that that implies.

True Money Supply

Next week

Next Wednesday sees the release of German inflation numbers and the minutes from the Fed’s June 18-19 FOMC meeting. French CPI numbers and an update from the Bank of Japan follow on Thursday. A quiet week as far as economic data is concerned.

See the original article >>

No comments:

Post a Comment

Follow Us