Gold prices are moving higher following the release of non-farm payrolls data for April. Stocks and oil are also in the green while the dollar index is slightly lower.
The U.S. Department of Labor today announced that the country added 223,000 new jobs last month while the unemployment rate dipped to 5.4 percent. This represents a seven year low.
Undoubtedly, this is being taken as good news by equity investors. It is interesting to note, however, that yields are lower today whole gold is also higher. Perhaps a bit confusing isn’t it?
While today’s data likely put many at ease following last month’s release of non-farm payrolls data for March, the reality is that the economy is still facing some significant headwinds. March non-farm payrolls data as well as revisions to previous months still remain a cause for concern.
Today’s number will likely fuel ongoing debate about the course of interest rate hikes. The fed has stated over and over again that its decision on rates would be data dependent, and today’s jobs report may be seen as constructive and help pave the way for the central bank to begin the tightening cycle.
The dollar is not showing much of a reaction to the data at all thus far. Since putting in an apparent double-bottom in recent weeks, the greenback has been trending lower as the euro has found some footing. This could work to gold’s advantage, as a stronger dollar index is likely one of the contributing factors in gold’s lack of upside follow through in recent months.
The higher price action being seen in gold today is likely more short covering than anything else. The market still has not seen much buying interest from fresh longs, and until it does may very well continue to trade range bound.
Gold is back above former support in the $1180 area as of this post, but must also clear the $1200 level before possibly attracting more interest.
Stocks have rebounded from a pull back in recent days, and may be poised to once again challenge their all time highs. Higher equities likely continue to be a drag on the precious metals complex, and until such time that stocks turn around, gold may see limited upside interest.
As has been the case for some time, equities could, in the short-term, hold the key to potentially higher gold. It appears that for now, gold will continue to bide its time until either equity weakness is seen on a larger scale or some other potentially bullish catalyst comes into play.
