Spot gold suddenly lost yesterday's gains this morning after the ADP private payrolls report was released. According to ADP, the economy added 217,000 new jobs in November, above analysts projections of 191,000. The ADP private payrolls report is considered an advance look at the official non-farm payrolls report, due out on Friday. One difference between the two is that the non-farm payrolls counts government jobs, and the ADP report does not.
The news goes into the "raise rates" side of the Fed decision calculation, sending the dollar higher. This may counteract the shock of yesterday's ISM manufacturing index falling into contraction territory for the first time in three years.
The higher dollar and a bearish sentiment on precious metals is sending prices lower in New York. Gold dropped from the 10-day moving average level of $1,070 overnight to retest the $1,058 level. First support is seen at $1,053, and first resistance is now pegged at $1,065.
The US dollar has recovered ground lost yesterday, when it finished below the 100 mark on the DXY index. That drop in the dollar was responsible for most of gold's gains yesterday. The greenback is back this morning, solidly above 100 on the DXY, which is causing a reversal of fortunes in gold.
The Yellen Tour
Federal Reserve chairman Janet Yellen speaks on two separate occasions today. First, she gave the welcoming remarks at the Fed College Challenge Final, where teams of college students compete in crafting their own monetary policy. This was a fairly simple speech, with no mention of monetary policy. At 12:25 today, she addresses the Economic Club of Washington, where she may have more substantive remarks.
Tomorrow morning, she speaks to Senators and Representatives in the Joint Economic committee, where she will discuss the Fed's outlook towards the economy and a December rate hike.
Economic Picture Gets Murkier
The surprisingly weak ISM report, combined with a falling Chicago PMI report, makes a rate hike by the Fed much less of a "slam dunk" as it was just last week. Chicago Fed president Charles Evans followed the downbeat vibe of the economy in the Midwest, when he said he was "nervous" over a December rate hike. Evans is a voting member in the Federal Reserve Open Market Committee (FOMC) for 2015, and December will be his last vote until his next turn.
Fed Board of Governors member Lael Brainard sounded her usual dovish outlook yesterday, worried that a December rate hike could push the economy back into recession. Atlanta Fed president Dennis Lockhart doesn't share that view, saying that there is a "compelling" case for a December rate hike.
Europe Goes Its Own Way
Tomorrow gives us wholesale prices in Europe, on the same day that the European Central Bank is widely expected to announce a ramping up of its quantitative easing program (aka "money printing".) This will put downward pressure on the euro, which will cause the dollar to rise. Not only does an even stronger dollar put pressure on commodities, but it hurts US exports by making them more expensive in other currencies. The euro is already below $1.06, and many are calling for the common currency to fall to parity with the dollar in the near future.
Payroll Data Will Dominate
Tomorrow will also give us first-time jobless claims in the US for last week, another payroll-related data point. However, the big daddy in employment reports is the Labor Department's non-farm payroll report for November. Analysts once again are expecting a growth of 190,000 jobs. This is the same estimate as last month, which blew away all expectations by showing a rise of 271,000 jobs. No one really expects a repeat of those knockout numbers, but anything north of 170,000 will probably be considered bullish for a December rate hike.
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