Gold prices seem to be ignoring a better that expected non-farm payrolls report this morning, actually gaining modestly after its release. Looking under the hood past the headline numbers, and noting negative revisions for prior months exposes a payrolls report that famous "Bond King" Bill Gross describes as "schizophrenic."
The yellow metal added about $5 per ounce to move above $1,220/oz, nearing its highest level of the year reached in intraday trading on Thursday. Meanwhile, spot silver was 0.2% higher (+4¢ per ounce), trading around $17.50/oz. Both platinum and palladium were reversing early losses to try and move back above unchanged.
Spot gold was trading slightly lower overnight, but quickly shot back up to minor gains after today's non-farm payrolls (NFP) report. The overall employment picture shows that 227,000 new jobs were added in January, against expectations of 180,000. However, a huge downward adjustment to November's report drew away some enthusiasm over the gains. November non-farm payrolls were slashed 40,000 jobs lower, from 204,000 to 164,000. December's numbers were revised upward marginally, adding 1,000 jobs to total 157,000.
The most sobering part of today's employment report was wages. Average wages only increased by three cents last month, mostly due to a 1% rise in compensation in the financial sector. The 2.5% year-on-year rise in average hourly earnings was below expectations. Weaker wage growth is a sign that inflation is not rising as quickly as policymakers had hoped, while also dragging the dollar lower.
Such wage stagnation is expected to stay the Fed's hand in moving interest rates. Moreover, the overall unemployment rate ticked up to 4.8%. However, President Trump's nominee for Treasury Secretary, Steve Mnuchin, wants the government to start using the more inclusive U5 unemployment rate rather than the U3 number. The U5 rate is currently 5.8%. (The U6 measure, considered the most comprehensive unemployment metric, showed a 9.4% rate.) This is significant because some 5.84 million Americans are "underemployed," forced into part-time work because there aren't enough full-time positions available.
The new presidential administration is impacting markets elsewhere, as well. Trump's blustery rhetoric and willingness to speak frankly have typically influenced trader behavior, but these unpredictable statements may be losing some of their potency. During the presidential campaign, the Mexican peso lost ground virtually every time Trump mentioned Mexico or his plan to build a border wall. Now, the peso has been one of the best-performing currencies so far in 2017 despite Trump's repeated jabs at the United States' southern neighbor.
Similarly, the oil market yawned at the president's bold declaration about being hard on Iran. On Friday morning, both WTI crude and Brent crude futures were about 1% higher, trading above $54/bbl and $57/bbl, respectively.
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