03-Jul (USAGOLD) — Gold retreated in early New York trading, weighed by rising Treasury yields and dollar gains in the wake of generally upbeat June employment report. The yellow metal dipped briefly to a new low for the week at 1308.79, but then quickly popped back above 1320.00.
Nonetheless, gold may notch its first lower close of the week in today’s holiday-shortened session. Markets will also be closed on Friday in observance of Independence Day.
Nonfarm payrolls came in at +288k in June, above expectations of +215k. The jobless rate fell to 6.1%, the lowest level since September 2008.
The headline numbers were pretty strong, suggesting that the Fed might have to backtrack on its recent assurances that rates will remain pegged near 0% for the foreseeable future. However, The drop in the jobless rate in particular was largely attributable to yet another new record high in the number of people not in the labor force. The labor force participation rate remained at 62.8%, a 36-year low.
“In the new landscape of the American labor market, jobs are easier to come by but hours remain in short supply,” reported Ylan Q. Mui in the Washington Post. So, in addition to the low labor-force participation, many of the jobs that people are getting are “low-quality part-time jobs.”
Stocks certainly liked the jobs data, with the DJIA closing at a record high above 17,000. But then again, stocks like everything these days. You may recall that they rallied on the massive -2.9% Q1 GDP miss as well.
Underpinning gold are rising geopolitical tensions in Iraq, Ukraine and now Israel. Growth risks, both in the U.S. and Europe remain a concern as well, which may ultimately prove to be the undoing of the equity rally. Smart investors will continue to take money off the table in shares, and use the proceeds to buy a little golden insurance.
The ECB announced steady policy today, in line with expectations. Mario Draghi said they’ve made further preparations for asset purchases, but clearly they are in ‘wait-and-see’ mode, hoping that inflation picks up.