Precious metals were hit this morning after the second big non-farm payrolls beat in as many months was released today. Spot gold prices were down $20 (-1.5%) to trade at $1,340 and ounce, while spot silver was down almost 3%. Half of these losses is due to a sharply stronger dollar, as the payrolls report increases the odds of a September rate hike by the Fed. Treasuries are acting accordingly this morning, as prices drop and yields rise.
The employment news caused stocks to open higher on sentiment that the economy was doing better than expected. Oil prices had been consolidating this morning, after a rise of nearly 6% over the last two days. The employment report gave crude futures a temporary boost, as the prospect of higher demand outweighed the pressure of a stronger dollar, but then fell sharply back into correction mode.
Gold futures ended the day Thursday slightly higher, gaining $2.70 to settle at $1,367.40 an ounce. Spot gold gained the same $2.70 an ounce to close at $1,360.40.
Silver futures shed three cents yesterday, settling at $20.44 an ounce.Spot silver lost seven cents, to close at $20.31.
The Bureau of Labor Statistics reported that 255,000 new jobs were added in the US last month. far more than the 180,000 economists expected. June's shockingly high report of 287,000 new jobs was actually revised upward by 5,000 to 292,000, the largest one-month gain in employment since last October.
Stocks ended flat on Thursday, as traders went into a defensive posture ahead of the Friday jobs report. Equities were helped by higher oil prices, which supported energy companies, while the financial sector was buoyed by upbeat earnings reports at major banks. The improved employment picture set the bulls loose on Wall St this morning, as the S&P 500 set a new intraday high in early trading.
The US dollar was assisted yesterday by the Bank of England's decision to cut interest rates and restart its money printing program. This morning's non-farm payrolls report lit a rocket under the greenback, sending it through the 96 mark and halfway to 97 on the DXY basket of major currencies.
Tempering the good news about the economy is the concern that the Fed will be unable to raise rates at the same time the rest of the developed world is cutting rates. The strong dollar has already pushed the US trade deficit to a 10-month high, as exporting companies see themselves priced out of the international market. This morning saw the CME Group FedWatch tool predicting an 18% chance of a rate hike next month, double yesterday's odds. Chances for a December rate hike rose from 32.1% yesterday to a 46.5% chance this morning. Odds don't break above 50/50 until next March. However, continued good economic news will raise the odds of the Fed acting on interest rates.
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