USAGOLD/Peter A. Grant/04-07-17
Gold remains well bid, having cleared key resistance at 1263.87 on haven buying in the wake of the U.S. cruise missile strike on Syria. Today’s nonfarm payrolls miss offered further support as June rate hike expectations ebbed.
Nonfarm payrolls came in at just +98k for March, well below market expectations of +200k. February was negatively revised to +219k, from +235k previously. The unemployment rate dropped to 4.5%, as the labor force participation rate held steady at 63%. Hourly earnings was in line with expectations at +0.2% and the average workweek held steady at 34.3 hours.
June rate hike expectations based on Fed funds futures dipped to about a 50/50 proposition. Meanwhile, the Atlanta Fed’s expectations for Q1 GDP tumbled to 0.6%.
Stocks aren’t quite sure what to do. The defense sector is up on heightened geopolitical expectations. The prospect for fewer rate hikes this year may provide some buoyancy as well. However, the weak jobs data and mounting growth risks could weigh on consumption, which would be a negative for stocks.
The U.S. strike on Syria may have gotten the meeting between President Trump and President Xi off on the wrong foot. Xi has not made an official comment on the attack yet, but China has generally sided with Russia and the Assad regime in the Syrian civil war. If nothing else, perhaps Xi will view Trump’s tough talk about North Korea with an additional degree of credibility.
Silver remains well bid as well, but has been unable to break-through its high for the year set in February at 18.48. However, with the 200-day moving average already negated and key resistance in gold now out of the way, silver may be poised for a charge higher.