The Daily Market Report: Gold Boosted By Weak U.S. Jobs Data

06-Apr (USAGOLD) — Gold gapped higher in overseas trading on Monday, extending to new 7-week highs above resistance at 1220.00/1223.30. These gains come on the heels of Friday’s dismal U.S. jobs report for March.

The U.S. economy added just 126k new jobs in March, well below market expectations of +250k. It was the worst payrolls number in 2-years. Both February and January were revised lower as well. The unemployment rate held steady at 5.5%.

That pretty much is the nail in the coffin for a Fed rate hike this year. The U.S. 10-year yield plunged all the way to 1.80% in Friday’s holiday shortened session. While much of that drop has been retraced today, I think today’s rise in rates is more a backing-and-filling move.

Goldman Sachs was quick to suggest “that the right policy would be to put hikes on hold for now.” Former Goldman Sachs partner and managing director, now New York Fed President, William Dudley is hopeful that the recent string of “downside surprises” are temporary.

Dudley was therefore not inclined to rule out tightening just yet. However, he cautioned that “If financial conditions tightened unduly, then this will likely cause us to go much more slowly or even to pause for a while.”

Mr. Dudley also pointed out that the recent rise in the dollar has resulted in a “significant shock” to the economy. Most of the dollar strength is directly attributable to Fed rate hike expectations that have developed over the past several quarters. It begs the question: Why would a rate hike even be on the table if dollar strength is causing a “significant shock”?

Initially rate “lift-off” was expected to occur in March, then it was moved back to June, and then September. Now, not only is rate hike not likely this year at all, but next year may be off the table as well. There are even renewed whispers of QE4.