The gold market is seeing some significant buying pressure today following the release of the latest non-farm payrolls data. Stocks are seeing some slight selling pressure while the dollar index also weakens. The crude oil market is slightly in the green as of this post.
The U.S. Department of Labor reported today that the country added just 160,000 jobs in the month of April. Consensus estimates were looking for an increase of about 200,000 jobs. The unemployment rate ticked slightly higher to five percent. This number was obviously well below estimates and also below the recent trend in job creation.
While some analysts have suggested that this is still a decent jobs report, it will likely temper expectations for additional rate hikes this year. In fact, some analysts believe that with this report showing some weakness compared to recent months, the Fed will not take action in June. Thus, the central bank may only hike interest rates once this year, possibly in December.
The notion of only one more hike coming this year may potentially send mixed signals to equity investors. On the one hand, the markets like lower rates. On the other hand, the fact that the economy is not strong enough to tolerate higher rates is also of significance. Stocks have been seeing some selling pressure in recent trade, and that trend could potentially continue. The fact that stocks were not able to make fresh highs during the last rally may also potentially motivate investors to seek out alternatives.
The dollar index has been the topic of much discussion in recent trade as the greenback experienced a very large bounce this week. The dollar took out some previous support levels only to come roaring back in what may have been a false breakout. The Fed electing to hold off on further hikes may, however, reignite selling pressure in the dollar index which is still in the midst of a strong downtrend. A weaker dollar could potentially drive further buying in gold, silver and other precious metals.
The gold market appears headed for another leg higher as it challenges the $1300 level. A break above this level on a closing basis could potentially be significant, and the market could potentially see a rapid run higher of $100 an ounce or more. The bulls are in form technical control at this point, and given the underlying fundamentals and technical picture, any dips in gold will likely be bought until proven otherwise.
