Gold prices are sharply higher today to begin the new trading week. The gold market is reacting today to Friday’s non-farm payrolls data in which the U.S. added far fewer jobs than expected.
The U.S. Department of Labor reported on Friday that the country added just 126,000 jobs while consensus estimates were looking for an increase of 248,000 jobs. The unemployment rate held steady at 5.5 percent. This poor jobs report will likely fuel ongoing debate about whether or not the Fed will raise rates this year. Before the release of the report, many seemed to feel that the central bank could potentially raise rates as soon as June or possibly September. With this poor showing, however, it seems all bets are off and investors will be looking for further clues from the Fed as to the timing of the initial rate hike.
The poor data has spurred further selling in the dollar index, and the greenback may have seen the highs for the time being. Recent strength in the dollar index has likely hampered gold and silver, and should the buck begin to show further signs of weakness it could potentially fuel a rally in the precious metals complex.
Stocks opened lower this morning but have come roaring back. Crude oil prices have moved back over the $50 per barrel level, and this may be contributing to the rally in equities today. Higher oil may also potentially benefit gold and silver prices.
This week’s FOMC minutes on Wednesday afternoon will likely be closely watched following the jobs data. Should the Fed appear to be more dovish in its remarks and commentary, it could send stocks back towards their highs while also potentially driving gold prices higher. Markets will also have plenty of data to chew on this week as well. The latest readings on PMI, ISM non-manufacturing, weekly jobless claims and wholesale trade are all set for release. In addition, there will be a number of Fed officials speaking this week.
The technical picture for gold has improved dramatically in recent trade. Gold prices are currently right at resistance around the $1220 level, with their sites possibly set on a move higher to the $1240 area. A move above this level could potentially see more fresh bulls entering the market, and a rally higher becomes a distinct possibility. Should the Fed appear to be more dovish following the non-farm payrolls data, market fundamentals along with technical buying may potentially send gold prices sharply higher in the near future.
