Gold prices are sharply lower this morning following the release of the non-farm payrolls data for October. Stocks and crude oil are moving lower, while the dollar index is sharply higher.
The U.S. Department of Labor reported this morning that the country added 271,000 jobs last month, while the unemployment rate stood at 5 percent. This number is seemingly “off the charts” as consensus estimates were looking for an increase of 190,000 jobs.
This surprisingly strong jobs data may very well give the Fed the green light for a December lift-off. In fact, this report may remove any doubt about whether the Fed will act next month.
The notion of higher rates is causing selling in both gold and silver and stocks, as well. Investors are acknowledging the reality of a rate hike this year, and that could potentially drive further selling in metals and equities.
Gold has fallen below the $1100 per-ounce mark and appears headed for another test of the lows seen in July. Without having much at this point to hang their hats on, the gold bulls may continue to exit the market and prices could potentially begin a significant fresh leg lower.
Also weighing on gold is the strength being seen in the dollar index. The greenback has popped sharply higher today following the jobs data and could be headed back to levels not seen since April. A break above those levels could potentially see another significant leg higher in the dollar, and that could potentially act as a huge source of upside resistance for gold and precious metals.
The U.S. move towards higher rates may, however, present an interesting conundrum. While the U.S. looks to begin normalizing interest rates, other areas of the world continue to hold rates at very low levels. China and the ECB may continue with various forms of economic stimulus over the coming months or perhaps even years.
Because of this, any rate hikes in the U.S. are likely to come at a very slow and gradual pace. That being said, if the economy continues to show signs of improvement, the Fed could potentially tighten at a faster rate than expected. Either way, the precious metals bulls may remain on the defensive unless some other bullish catalyst comes into play.
Lower stocks could potentially help drive some buying in precious metals and add some stability. It remains to be seen, however, how stocks will react once the Fed does in fact initiate lift-off.
