The precious metals lost ground again on Wednesday morning as the markets salivated at the February ADP payrolls report, which exceeded all expectations. This drove outflows from gold-backed ETFs and has undoubtedly prompted many traders to close their long positions in gold futures. This dragged spot gold down by about 0.6% to just under $1,210/oz. Meanwhile, spot silver sank more than 1% to $17.30/oz, a five-week low.
Platinum prices were also off about 0.9%, trading near $950/oz. For the second straight session, palladium moved against the grain of the other precious metals, poking into positive territory.
The ADP and Moody Analytics private-sector payrolls report showed a drastic increase in hiring during the month of February. Nearly 300,000 new jobs were created last month, compared to expectations of less than 200,000 from a group of economists. The tally was buoyed by a higher number of jobs added by goods producers, manufacturers, and construction firms.
This was by far the largest monthly gains in private-sector employment in the past 12 months. It follows a strong January (revised upward to 261,000 jobs added) that was also the highest total in at least a year. This not only reflects well on the U.S. economy, but bolsters the belief that the Federal Reserve will have to search for reasons not to raise interest rates next week.
We won't have to wait long for the next key jobs report, however. On Friday, the Labor Department will release its nonfarm payrolls (NFP), which the Fed has indicated it will consider at the two-day FOMC meeting on March 14th to 15th.
There is, however, a caveat to the strong jobs numbers. According to the Labor Department, productivity growth was relatively sluggish during the fourth quarter, registering at just 1.3%. This was a significant drop from the 3.3% uptick during Q3. This means that many firms are hiring simply because productivity is low, and more workers are needed to maintain the same level of output. Such job growth doesn't necessarily bode well for economic growth overall.
The monster employment report gave Wall St and the U.S. dollar a boost, as both added about 0.2% in early trading. This vaulted the greenback above 102.0 on the DXY dollar index. The selloff in government bonds continued, pushing 10-year Treasury yields up to 2.56%.
European markets were modestly higher on Wednesday. The euro trended slightly lower, just below $1.06. Shares were down in Asia overnight, as the Shanghai Composite closed 0.05% lower and Tokyo's Nikkei 225 index lost almost 0.5%. The Japanese yen and Chinese yuan each gave up ground to the dollar, as did the British pound sterling.
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