Gold prices are slightly lower this morning following the release of the non-farm payrolls data for August. The data was a miss, showing job growth of 173,000 jobs while consensus estimates were looking for an increase of 220,000 jobs. Revisions to prior months data may be keeping investors calmer in light of today’s miss, however; stocks are still seeing some decent selling today.
Some may look at today’s data along with the prior revisions as favoring the hawkish camp. Today’s data may, however, only add to speculation about the likelihood of a rate hike sometime this year, even as soon as this month.
It seems, as previously stated, that any decision by the Fed this month will likely be a “game time” decision.
Of course, the markets and the Fed have much more to consider outside of U.S. economic data. Markets have been taking their cues from action in Chinese markets, and if China continues to exhibit the kind of volatility seen in recent weeks, the Fed may potentially look at that as another potential reason to hold off on any hikes for now.
While gold had been showing some signs of life as investors sought refuge from volatile equity markets, the gold bulls have thus far not been able to build upon the recent rally. After seeing prices trade around the $1170 per ounce level, gold has been weaker. A breach back below the $1120 per ounce level could potentially fuel further selling in the yellow metal and prices could retest recent lows around the $1080 level.
Gold may, in fact, simply be in a holding pattern until the Fed makes a decision on rates. Once the Fed does actually take action, that could potentially give gold investors reason to buy as the uncertainty surrounding the situation would at least subside.
In key outside markets today, crude oil prices are once again on the defensive while the dollar index is slightly weaker. Oil may be headed back for another run at the $40 per barrel level, and could potentially see even further downside on concerns over China. Raw commodities in general may remain under some selling pressure, and this in turn could potentially boost the dollar.
While gold may not seem to have much working in its favor right now, the metal is once again approaching its production cost which may potentially halt the slide in price. In addition, if further volatility is seen in Chinese stocks, investors may potentially seek out gold as a perceived safe haven.
