Gold had reasons to enter September on a slightly bullish note after August U.S. jobs data showed that the labor market is still unpredictable. Investors and traders with exposure to the Direxion Shares Exchange Traded Fund Trust saw a return to bullish trends after the ETF recorded a massive 10.78% in gains to end Friday’s session at 21.89.
The August jobs report was less than impressive and bullion investors are confident that the U.S. Federal Reserve won’t be bold to raise interest rates. This piece examines the August jobs data by the numbers; the reaction of economists, and how the jobs data could affect gold prices going forward.
August job data by the numbers
Investors with exposure to gold or Direxion Shares Exchange Traded Fund Trust can relax in the understanding that the yellow metal will enjoy bullish uptrend this week. Data released last Friday by the U.S Bureau of Labor Statistics shows that there’s a slowdown in hiring among U.S. employers. Employers added 151,000 job in August, the number of jobs added fell short of the consensus estimate of 180,000 jobs.
The August jobs number was short of economists estimates and it underperforms the job gains of the previous two months. U.S. employers added 275,000 jobs in July and they added 271,000 jobs in June. U.S. employers have added an average of 232.000 jobs in the last three months but the unemployment rate has remained unchanged at 4.9%.
Economists have reacted to the weak jobs data over the weekend and the general trend is that the fed won’t be raising interest rates soon and that gold prices will record an uptrend. Scott Anderson an analyst with Bank of the West observes that “overall, a weaker than expected jobs report for August that showed renewed softening in the goods-producing side of the economy. This report should give the FOMC pause as they consider whether to increase interest rates at their next meeting this month.”
Joseph Brusuelas an analyst at RSM is not optimistic about the economic outlook. In his words, “Hiring fell back to earth with the total change in hiring of 151,000, the private sector generating only 126,000 and the unemployment rate holding steady at 4.9 percent. In our estimation, the topline and private-sector number is indicative of the true trend in hiring, which late in the business cycle is slowing.”
What can investors expect from gold going forward?
This morning gold is already booking gains in European market and you can expect gains in the bullion and Direxion Shares Exchange Traded Fund Trust when U.S. markets open tomorrow. Spot gold was up 0.2% to $1,326.83 an ounce as at 0652GMT. U.S. gold futures were also booking gains with a 0.3% uptrend to $1,330.50 this morning.
Sam Laughlin, a precious metal trader with MKS PAMP notes that “Gold should continue to see interest support following Friday’s jobs data as the chances of an interest rate rise in September pull back.” More so, Mark To, head of research at Hong Kong’s Wing Fung Financial Group observes that “The disappointment in the nonfarm payrolls data has been translated into optimism for gold prices at the moment. We can expect prices to further rebound to $1,350 in a short-term.”
Nonetheless, gold is not likely to book massive gains today because trading activities will be limited to European and Asian markets today. U.S. markets are out of commission for the Labor Day holidays; nonetheless, the market trends for gold today will set the pace when U.S. traders return to the market for the rest of the week.