Precious metals managed to finish the week strongly thanks to August jobs data that mostly missed the mark. Even though the beginning of next week is supposed to mark the beginning of more market activity, this week was quite exciting and had a lot to talk about, especially as it relates to employment data and US economic data in general.
After beginning the week in dismal fashion, metals were able to bounce back and finish the 5-day trading session on the up and up. Markets in the US are going to be closed for the Labor Day holiday this upcoming Monday, but upon the reopening of markets on Tuesday you can bet that there is going to be a good bit of activity.
As is typical of any week that sees one month end and another begin, this past 5-day trading session was dominated by employment data. First up was the private-sector employment growth report from the payrolls processor ADP. Even though this report is hardly ever considered to be overly important in the eyes of investors, it is paid attention to nonetheless. As expected, the ADP report impressed and showed that a larger number of private-sector jobs than originally anticipated were added to the economy during August. All in all, this report had very little impact on precious metals nor many other assets.
A day later, on Thursday, we were once again given a relatively upbeat report on week-by-week claims for unemployment benefits. According to the data, first-time claims for unemployment benefits jumped up by 2,000 last week to bring the seasonally-adjusted average number of claims to 263,000. While any jump is not the best news, we are now closing in on 80 consecutive weeks where the seasonally-adjusted average is below 300,000, and this alone provides investors with a nice psychological boost.
The week was rounded out, however, by a Labor Department non-farms jobs growth report that fell short of expectations. In all reality, very few people were expecting this report to be overly upbeat. Expectations were for about 180,000 new jobs to be created, and the actual figures came in far short of that. Officially, only about 150,000 new jobs were added to the economy in August. This news gave precious metals a boost to end the week and turned what would have been weekly losses into marginal gains. This is a psychological boost for metals investors thanks to it favoring the monetary policy doves.
There is no evidence to support this, but today’s data to close out the week suggests that interest rate hikes may be a good whiles away.
The Institute for Supply Managements manufacturing PMI was released this week, and it showed what many people are already fully aware of. At the end of the day, the manufacturing sector of the US economy is not doing very well and is, quite frankly, flirting with contraction. The Index’s reading came back below 50, and even if you know nothing about the PMI, a big takeaway is that any reading below 50 suggests that the economic sector in question is experiencing, or on the verge of experiencing, contraction.
This too lends itself to the monetary policy doves. As we head into next week, it will be interesting to see what kind of impact this late-week data has on the minds of investors. For now, precious metals are going to be on the receiving end of a boost as spot values are moving upward. The real test, however, will be to see if today’s gains can withstand the holiday weekend. That much is tough to say, but for now it seems as though hopes for interest rate hikes in the near future has all but subsided.
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