Gold prices are weaker this morning following the release of non-farm payrolls data for May. According to the U.S. Department of Labor, the country added 280,000 jobs last month while the unempl0yment rate ticked up to 5.5 percent. The uptick in the unemployment rate was attributed to more people actively looking for work.
The 280,000 jobs added is thus far being viewed as a solid number. The surge in hiring was widespread and shows companies are still actively looking for more help in spite of a very slow first quarter. This may be a good sign for economic activity in the quarters ahead.
Also noteworthy is the fact that wages rose. Companies may now be forced to pay more to attract quality workers in another sign of improving economic conditions.
Stocks are lower on the news as worries over Greece may be offsetting any buying on the news. The dollar index is sharply higher following the data, and may keep gold prices under pressure.
This better-than-expected jobs report may bolster the likelihood of an initial rate hike from the Fed in September or even as soon as next month. It will be interesting to see, however, if the Fed considers yesterday’s plea from the IMF to refrain from raising rates until next year.
While Greece is being largely ignored by markets currently, this situation is certainly not going away. The country appears to have put off a large payment due today to the IMF, and says it will put multiple payments together into one lump sum to be paid at month’s end. What this will accomplish is unclear. It does appear, however, that Greece does not have the necessary funds to make today’s scheduled payment. Perhaps they have simply postponed the inevitable…
Markets do not appear overly concerned about this yet, but that could change rapidly.
Volatility continues to be seen in global bond markets. This volatility may be present for some time as investors try to gauge central bank intentions and as inflationary pressures begin to slowly creep back into global economies. This volatility may, in turn, spill over into global equity markets, as well.
Gold is currently below recent support and appears headed for another run at the $1140 area. A clean break below this support level could set the stage for another run lower in gold that could possibly see prices reach the $1000 per ounce level. We believe that should such a scenario unfold, it could represent the last leg down and final “washout” in the gold market before the market turns higher and resumes its longer-term uptrend.