The Daily Market Report: Gold Consolidates Ahead of Jobs Data

USAGOLD/Peter Grant/07-06-17

Gold is maintaining a consolidative tone at the low end of the recent range. Trading remains thin in this holiday shortened week with focus on tomorrow’s jobs report.

Nonfarm payrolls for June are expected to come in at +180k and the unemployment rate is anticipated to hold steady at 4.3%. Today’s weaker than expected ADP employment survey may indicate some downside risk to headline payrolls. Evidence of weakness in the jobs market may erode rate hike expectations in the second half of the year.

Fed Governor Powell spoke today and acknowledged that while the housing market has recovered, the current finance system is “unsustainable.” He went on to add that GSE (Fannie and Freedie) backed mortgage securities still pose systemic risks and potential taxpayer losses.

Say what now? I thought the housing crisis was behind us? Systemic risks? I thought we weren’t going to have another crisis in our lifetimes?

While complacency is at an all-time high and volatility is at an all time low (see the previous post), rational people have to know that divergence can not be sustained indefinitely. When the reversion to the mean comes, it is likely to be ugly. Volatility will surge and complacency will plummet.

There are a myriad of risks out there that might trigger that event. It would likely take some severe backtracking on the part of the Fed to reverse that course, but their credibility may well be decimated by such an event as well. The implications of that are disturbing indeed.

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