Gold prices are trading higher this morning following a weaker-than-expected non-farm payrolls report for the month of January. The U.S. Department of Labor’s much anticipated jobs report showed a meager 113,000 jobs added while the unemployment rate dipped to 6.6%. Consensus estimates were looking for an increase in jobs of around 190,000. Clearly this number is a big miss-yet stocks are moving sharply higher as of this post as investors contemplate the potential implications for monetary policy going forward.
Does this mean the Fed will taper the tapering? Hard to say, but many feel it is unlikely. This report does certainly add to the argument, however, that the Fed may have to hold steady on its current pace of bond purchases. This report follows a poor report last month, and also comes at a time when the economic data stream is clearly showing some signs of weakness. The question now becomes whether or not what we are seeing currently is simply some bumps in the road to recovery or if it is the beginning of something more serious. Stocks have been able to stop their recent bleeding, however, it remains unclear if buyers will continue to enter the market on this current dip. Emerging markets appeared to calm down a great deal this past week, however, this situation also remains very touchy. With China returning from its Lunar New Year holiday, volatility could potentially increase again.
Gold prices remain just below the recent swing highs in the $1280 area. This level appears to be a key level to clear for the gold bulls. It is possible that gold prices will get some continuing help from higher energy prices as cold continues to sweep across the nation. In addition, the dollar has begun to trend slightly lower the last few sessions, and dollar weakness could also potentially help the gold bulls clear overhead resistance. Gold continues to make higher lows as well, which can also be seen as a potentially bullish sign.
Gold did not do a whole lot this week one way or the other. The bulls appear to have the advantage here, but must power up soon and clear resistance or sellers may take control again. It is quite possible that gold’s immediate fate may be determined early next week. Investors will continue to watch how stocks perform and will also monitor emerging markets for signs of strain. Should stocks begin to weaken, or should currency strains appear again, then gold investors may have reasons to continue buying and prices could potentially see another leg higher.
