Gold prices took off for the Moon this morning as US non-farm payrolls reported a 38,000 build. That is not a typo. Analysts expected growth by 164,000 jobs. April's payrolls were slashed by 37,000 jobs to 123,000, and March payrolls were cut 20,000 to 186,000.
The dollar took a nose dive on the news, lifting all major competitors (euro, pound, and yen.) This morning's mind-boggling bad non-farm payrolls report guarantees that the Fed will not raise benchmark interest rates at their meeting in two weeks, and puts the odds of July down to 36%.
Today's revised technical numbers are taking this morning's high of $1242 as first resistance. As that is $32 higher than before the payrolls report, we don't see gold getting much higher than $1247 before some profit taking sets in. Frantic short-covering activity should abate by then.
Support comes in at $1231, with $1220 (a 50% retrenchment from this morning's high) as second support.
Oil once again rode to Wall St.'s rescue Thursday, as news of a drawdown in US crude stocks overwrote any mild disappointment that OPEC (as expected) did not agree on a production ceiling. However, even $50 Brent could not pull stocks completely out of the deep hole they'd dug for themselves. The Dow ended up down by 33.42 points (-0.19%), the S&P 500 shed 5.3 points (-0.25%), while the Nasdaq ended 7.77 points (-0.16%) lower.Oil futures sold off in the wake of the OPEC meeting in Vienna and signs of softening demand. The news from the US Energy Information Administration that crude stockpile in the US fell by 1.4 million barrels (against yesterday's API report that claimed a 2.35 million barrel increase) gave oil the boost it needed. WTI futures for July ended at $49.17, a gain of 16 cents (+0.33%), while Brent jumped 32 cents (+0.64%) to break back above the magic $50 mark, ending at $50.04.
The euro fell Thursday, taking Draghi's press conference as a sign the ECB will increase its money printing in the near future. The weaker euro helped counteract the effect of a stronger yen against the dollar, leading the greenback to end essentially flat against a basket of currencies, at 95.378.
Dallas Federal Reserve president Robert Kaplan poked gold in the eye Thursday, saying that he would like to see a rate hike "in the near future." He did offer commodities a consolation prize, saying that it was probably prudent to wait until after the Brexit vote before raising rates. Of course, everyone took that to mean a July rate hike was a slam dunk, so we will see.
Rate hike mania led to June gold futures settling at $1,209.80 an ounce, down $2.10. This is the lowest futures settlement since February 16th. Spot gold closed near the bottom of Thursday's trading range, ending down $2.30 to $1,210.40.
Part of the blame for today's shocking non-farm payrolls report is being laid at the feet of striking Verizon employees. Since they were not getting paid, they counted as unemployed. This removed 34,000 from May payrolls, but even if they were not striking, it would still mean a print of only 72,000 jobs, less than half the expected number. Tens of thousands of people gave up on finding a job last month, leading the unemployment rate to actually drop to 4.7% from 5%.
Besides this morning's earth-shaking payrolls report, the US trade deficit grew by 5.3%, slower than expected. Factory orders barely missed an expectation of 2%, gaining slightly from last month to post a 1.9% gain.
The ISM non-manufacturing index became another anchor pulling the dollar and stocks downward. The index for May was expected to barely ease, to a reading of 55.5. What traders got instead was a big 2.8 point drop to 52.9. New orders fell by 5.7 points to 54.2. The ISM services employment index fell into contraction territory, to 49.7 from 53.
The dollar dropped like a rock after the payrolls report, falling 1.5% against a basket of currencies. The collapse in the greenback is providing 2/3 of the energy that has lifted gold by more than $30 an ounce this morning.
Gold is probing that $1242 resistance line this morning, up $30 an ounce since 8:30am. If it can hold on to gains, it will erase an weekly loss into a gain. Watch for Fed chair Janet Yellen to go into damage control mode on Monday, as she gives a speech in Philadelphia. We should also be treated to the onslaught of Fedheads hitting the airwaves, trying to talk the market into their preferred direction.
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