The spot gold price began Friday up ever so slightly after being battered all week. The yellow metal traded around $1,230/oz when markets opened in New York, while spot silver was 2¢ per ounce higher at $16.30/oz. Silver still sits more than 10% below its April high of $18.70/oz, which occurred just three weeks ago.
The Platinum Group Metals were each up about 0.7%, with only about a $100 spread between platinum ($913/oz) and palladium ($813/oz).
The early morning action for the precious metals came somewhat as a surprise due to the better-than-expected nonfarm payrolls (NFP) report released by the Labor Department today. One would expect the ostensibly improving employment outlook to drive some money out of gold, but this may simply be an indication that the sell side of the trade has become exhausted. Gold and silver have been losing ground at a fairly quick pace this week, so we may be due for at least a modest reversal.
The jobs report on Friday showed not only that over 200,000 new jobs were added (translation: private-sector workers were hired) during the month of April. Moreover, the official unemployment rate dropped to a 10-year low of 4.4%, last seen in May of 2007. For this reason, many are characterizing the job market as the strongest since the Great Recession.
Like the precious metals, crude oil has continued to tumble lower to begin this month. Essentially, all of the oil market's gains since the production cuts by OPEC nations was announced last November have been ceded back—even though the caps on production remain in place. In part, the self-imposed cut in output by OPEC has only encouraged other producers to fill the gap. On Friday morning, WTI crude was trading below $45.50 a barrel, just off of more than a one-year low.
On the policy side, six different Fed officials will be speaking today. This is sure to fill the airwaves with mixed messages that aren't quite optimistic but fall short of being pessimistic. Meanwhile, in Washington, the Trump administration has been busy putting more of its priorities into actual legislation after passing the "First Hundred Days" milestone. In addition to the House of Representatives finally repealing Obamacare (which the Senate will now vote on) and movement on tax cuts down the road, Congress has also approved changes to the Dodd-Frank legislation that imposed more stringent regulations on Wall St and big finance.
Dodd-Frank is a contentious, controversial set of rules for banks and other firms that was supposed to address risky practices in the industry following the financial crisis. Republicans are largely in agreement that the law is too burdensome and has inhibited post-recession growth in the U.S. (The legislation was passed by a Democrat-controlled Congress.) President Trump has said that—despite eight years of low interest rates—lending has become far more difficult than it was in the past, and that adjusting the law will be better for small businesses.
If the government runs more smoothly (often referred to as "getting the trains to run on time") than it has so far, and certainly than it did during the last administration, we may see gold prices lose some of their luster as investors become more and more confident about the U.S. economy. A string of "victories" for the White House and the GOP would go a long way toward quelling the market anxieties that have persisted during the first four months of the year. However, if there continue to be major roadblocks to anything getting done in D.C., then a fresh round of safe-haven flight into the precious metals would make sense.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.