Direxion Shares Exchange Traded Fund Trust should have traders and investors going home with a happy smile as gold recovered from previous losses to jump on the weak U.S. jobs report. On Thursday, the market was filled a sense of mounting fears that the price of the yellow metal might slide lower because the ADP jobs report suggests that the BLS jobs data will be superb. In fact, analysts seem to think that a positive showing would further weaken gold prices.
However, the jobs data has been released and it is weaker than expected – the weak jobs report is good news for gold investors because weak economic data might delay the Feds decision to raise interest rates. It was reported that U.S. nonfarm payrolls added 142,000 jobs in September – a huge drop from the consensus estimate of 200,000 jobs. The jobless rate also stood in line with the estimate at 5.1%.
Serious weakness in job data strengthens gold
The underperformance of the jobs data will surely weaken the Fed’s resolve to raise interest rates by December because the fed has said that the decision on when to raise the rates will be data-dependent. However, the main good news for the bullion was not the weakness in the Sept jobs data – it could have been a fluke or an anomaly. However, the main fact that showed weakness in the U.S. economy is that the August jobs number was slashed by a whopping 21% to 136,000.
The reduction of the Aug. job data to 136,000 and the Sept jobs number at 142,000 all below the 200,000 mark shows that there’s a major weakness in the economy. R.J. O’Brien in Chicago, a senior commodities broker at R.J. O’Brien in Chicago says “That was a pretty big miss”. Going forward, he expects the weakness to boost the bullish chances of gold ETFs such as Direxion Shares Exchange Traded Fund Trust [qm q=”NUGT” m=”NYSEARCA” c=”Gold.
The general fear in the market was the strong jobs data would embolden the Fed to raise interest rates; thereby exerting more downward pressure on the price of bullion. However, the weak jobs data has changed the dynamics of the market. O’Brien notes that, “It’s pretty bullish for gold for the remainder of the year. With data like that, I don’t see how the Fed is going to be in a position to raise rates.”
And Gold climbs up slowly
The weakness in the jobs data is already showing bullish signs for gold in today’s session. Gold for Dec. delivery was up 2.1% to $1,136.60 per troy ounce today to mark the biggest bounce since August 20. Bloomberg reports “Barrick Gold Corp., the world’s biggest producer of the metal, rose the most in more than a week, gaining 4.9 percent to C$8.59 in Toronto. Yamana Gold Inc. jumped 5.6 percent to C$2.27, and the 30-member Philadelphia Stock Exchange God and Silver Index advanced 4.4 percent.” As at 1.16PM EDT, Direxion Shares Exchange Traded Fund Trust [qm q=”NUGT” m=”NYSEARCA” c=”Gold was up 16.85% to $31.57.