Gold is trading sharply higher today as stocks and crude oil move higher and the dollar index sinks. Markets appear to be reacting to this morning’s release of the non-farm payrolls data for February and investor appetite for risk continues to be increasing.
This morning, the U.S. Department of Labor reported continued growth in the U.S. labor market. According to the department, non-farm payrolls increased by 242,000 while the unemployment rate held steady at 4.9 percent. The number of jobs added was well above consensus estimates of 190,000 jobs added. There were also revisions reported for January jobs data that increased the amount of jobs added in the first month of the year by about 20,000. Of particular note is the fact that the participation rate also rose from 62.7 percent to 62.9 percent.
The report also showed a decrease in hourly wages, however, with average hourly wages declining by $.03.
Investors are now likely digesting the data, although it remains unclear if it will have any real implications for the Fed and its plans regarding interest rates. While today’s data may increase the chances of further hikes by the central bank, some analysts believe it remains unlikely that four hikes will be seen.
While the jobs data may alleviate some fears of the country slipping back into recession, the markets still face many hurdles going forward. While risk appetite is higher currently, that can potentially change quickly with further negative developments out of China or other markets.
Crude oil continues to maintain trade above the $30 per barrel level and there appears to be more and more talk of a bottom having been reached. Crude oil is now trading in the midthirties and have some bullish technical momentum working in its favor. While oil may not rise substantially in the near future, stable oil prices will likely fuel further risk appetite and potentially higher equity markets. While this could be considered a negative for gold, gold could stand to benefit if the commodity bust cycle has run its course. Higher crude oil and commodities could also potentially mean a weaker dollar, as well which could possibly drive buying in gold and precious metals.
Gold appears poised for further upside and the bulls appear to be in firm technical control. Any dips are likely to be bought at this point until proven otherwise and the
yellow metal could potentially see significantly higher prices in the coming weeks and months.
