The Daily Market Report: Gold Retreats Into the Range, as Markets Shrug-Off NFP Miss/Soft Wages

USAGOLD/Peter Grant/11-03-17

Gold is down intraday, having retreated back to the low-end of the recent range in the wake of today’s mixed U.S. economic data. The dollar index edged to new 15-week highs, helping to keep both gold and silver well contained.

Nonfarm payrolls rebounded in October, but missed expectations by a fairly wide margin. While September was revised higher, taking the negative print off the table, it was still a rather dismal couple months.

Average hourly earnings disappointed as well, coming in unchanged. The annualized pace of wage growth slowed to 2.4% y/y. That does not improve the prospects for higher inflation.

The market however has latched on to the downtick in the unemployment rate to a 17-year low of 4.1%, as evidence that things in the labor market are just great. A little scratching at the surface however paints a somewhat more ominous picture.

Nearly a million Americans dropped out of the labor force in October, pushing the labor force participation rate down to 62.7%. Rebounds in the participation rate in recent years have just failed to gain any traction.

In accepting President Trump’s nomination to be the next Fed Chair, Jerome Powell said he would do all he could to meet the Fed’s dual mandates of stable prices and maximum employment. Stable prices in Fed-world means 2% inflation. The central bank is clearly missing the mark on that front.

When Yellen, Powell and the rest of the FOMC looks at employment, I know they look beyond just the jobless rate. If they’re being honest, they’d have to acknowledge that it’s not all roses and sunshine on the labor front either.

That all suggests to me that the pause in the tightening cycle initiated in September, largely because of continued week inflation, just might not come to and end in December as many seem to believe. If nothing else, the surety that the market feels about a December rate hike is really overpriced. I was happy to read today that I have some good company.

Today’s pullback within the range provides an opportunity for gold investors to pick up some physical near 5-week lows. A rebound above $1300 is still needed to ease near-term pressure on the downside, with the high for this week — set yesterday at 1284.15 — marking an important intervening barrier.

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