Gold prices jumped from $1,280 an ounce to $1,296 on news of a very disappointing non-farm payrolls report for April. The Bureau of Labor Statistics reported that 160,000 new jobs were added to the US economy last month. This was far below the expected 202,000, and the lowest gain in seven months. More than double that number gave up on finding jobs last month. 362,000 people dropped out of the workforce, which helped the unemployment rate stay at 5.0%. Jobs numbers for February and March were revised downward by 19,000 jobs.
The dollar, which was already in the red, dropped sharply on the NFP report, before regaining previous (negative) levels. However, the dollar is only contributing marginally to this morning's gold rally. Today's payroll report has moved more people to disregard proclamations from various Federal Reserve regional presidents that a June rate hike is a real possibility.
Today's technical numbers for gold show support at $1,280, then $1,276. First resistance is at $1,289, then $1,296.
Even though the dollar is down among most major currencies, the British pound is falling faster. Brexit fears continue to weigh on the UK economy. Market sentiment will only become more volatile as the June 23 referendum gets closer.
In other currency news, the yuan was down for the fifth day today, as the Chinese central bank weakens the currency against the dollar. Beijing has chosen to keep the yuan more in line with the currencies of its trading partners, instead of keying off a rising dollar. They are walking a tightrope between weakening enough to help exporters, without sparking more capital flight.
Bloomberg quotes Nathan Chow, an economist at DBS Group Holdings Ltd. in Hong Kong, as saying "The yuan index won’t fall much further, or else there could be a currency war."
Crude oil prices seem to ignore disruptions to oil supplies in Canada, Libya, and Nigeria. Instead, traders keyed in on the non-farm payrolls report, which is signaling a slowdown in the US economy. That worry soon wore off, and oil recovered early losses.
Eyes will be on gold today, to see how close it can get to a $1,300 close. If it can sustain this morning's strength into the close, we have a good chance of making a third run at that psychologically important level.
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