Gold buyers got another reason to buy gold last week after the U.S. jobs report came in lower than expected. In the complex world of gold trading, the report has several implications, some contradictory. However, with all eyes focused on the Fed and a potential rate increase this year, this report indicates that yet another committee meeting will come and go without such a mandated rise.
Good News, But Not Good Enough
The markets for equities looked a bit like a roller coaster as traders tried to decide the full impact of a non-farms payroll report that showed 142,000 new jobs created in September. While this was good news, it fell well under the hoped for 203,000 such additions. The additional bad news of increased wage stagnation was somewhat counterbalanced by a total unemployment rate that remained at 5.1 percent, a seven-year low.
Just 15 minutes after the announcement of the details of the report, gold was up $25, closing up for the day 1.9 percent, or $1,138. Investors in gold have been watching the Fed rate for the past year, anticipating that it will eventually increase after a historic period of nearly seven years near zero percent. Of course, an increase in such interest generally impacts all non-interest yielding instruments and commodities, including gold.
The market is just now settling in after the September Fed decision not to raise rates. However, the Fed was clear to state that a rate hike should still be expected, possibly before the end of the year. However, the numbers in this latest jobs report, particularly in light of the U.S. presidential race, makes March of next year seem to many as the earliest the Fed will finally make even a de minimis increase.
Learn everything you should know about investing in precious metals.Request the Free Guide
More Trouble Than Jobs
A September article in Fortune proved prescient in predicting the Fed would not act for a multitude of reasons beyond the possible weakness of the U.S. economy. Concerns over China, ongoing instability in the equities market, and the growing unrest in the Middle East are only a few of the items in a list of factors arguing against a premature increase in the Fed rate.
A detailed review of the issue by the New York Times notes that while an increase in the rate may well be overdue, the next date of December 16th will probably see another delay to the March 16th meeting. Of course, Chairwoman Yellen could call for a two-day meeting of the Federal Open Market Committee at any time. It is this group that sets the key target rate, and it would be unusual to call an unscheduled meeting.
The bottom line is that investors concerned about gold prices suffering due to Fed decisions can relax for at least a couple more months, and perhaps much more, as this major factor in market uncertainty seems to be prolonged once again.