Gold prices are moderately higher this morning, as traders discount the possibility of an increase in benchmark interest rates at the Fed's Open Market Committee in 15 days. Gold was already trading at an 11-day high before misses in both the ISM Non-manufacturing Index and US Labor Market Conditions at 10am saw gold pop another $5 an ounce. Gold was trading above $1,340 an ounce in New York immediately after the reports.
Silver also rose in a choppy fashion to session highs. The dollar, which was already battling weakness brought on by Friday's immediately plunged on the news, to double this morning's losses. The DXY dollar index is now down nearly 1% this morning.
The ISM Non-manufacturing Index for August was far below expectations, dropping from 55.5 to 51.4. Economists had expected a minor drop to 55.50. August's numbers were the worst one-month drop since the financial crisis.
US Labor Market Conditions were even worse, dropping from a revised 1.3 to -0.7. This makes the seventh month out of the last eight with a negative reading. July has been the only bright spot this year, labor-wise.
The news slashed market estimates of a rate hike by the Fed. Odds of a rate hike in two weeks fell from 27% early this morning to only 15% after the reports. Odds of a December rate hike fell from 58.9% just prior to the release of today's economic reports, to 50.7% afterword.
Across the Atlantic, the British Pound is soaring against the dollar, catching currency bears off guard. The Markit Services PMI for the UK in August came in at 52.9, from a seven-year low of 47.4 in July. This is the largest one-month jump in the index on record, stretching back 20 years. Today marks the fifth day in a row that the GBP has advanced versus the USD, but it is still far below levels before the Brexit vote.
US markets were closed Monday in observance of Labor Day.
Friday saw December gold futures log moderate gains, closing $9.60 higher at $1,326.70 an ounce. This was barely enough to for gold futures to end in positive territory -- up 0.1%. December silver rose 2.2% Friday to settle at $19.37 an ounce. This was enough for "poor man's gold" to end the week 3.3% higher.
Spot gold closed $11.20 higher Friday, at $1.324.80 an ounce. Spot silver closed up 57 cents for a 3% gain for the day.
Oil prices got a boost Friday from Russian president Putin, who said that oil producing countries should get a production freeze done at this month's informal meeting in Algiers. A non-farm payrolls report Friday that came in slightly under expectations also helped oil futures close with a gain 3%. WTI was down 6.7% for the week, while international benchmark Brent crude still lost 5.3% for the week.
Bonds had a seesaw day to close the week, as "perma-hawk" president of the Richmond Fed Jeffrey Lacker gave an aggressive speech asserting that the Fed was way behind in its interest rate policy. His statements put selling pressure on Treasuries, which had seen yields fall on reduced expectations of a rate hike.
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