Gold Gains On Post-Holiday Demand From China
- U.S. non-farm payrolls rose by 156k last month, down from a gain of 167k in August. The unemployment rate ticked up a tenth of a percentage point to 5.0% as more Americans rejoined the labor force. The market had expected non-farm payrolls at 175k and unemployment rate at 4.9%.
- Hourly wages for private sector workers rose 2.6% in September from the same month a year earlier, in line with expectations. Wage growth has shown signs of accelerating over the last year but remains slower than before the 2007-2009 recession
- Fed Vice Chair Stanley Fischer said the jobs report was "close" to ideal, showing employment growth was neither too fast nor too slow. He did not address the Fed's rate hike plans directly. But his comments seemed consistent with what some policymakers have described as its "base case" - a rate increase at the December policy meeting.
- Fed Chair Janet Yellen has said the economy needs to create less than 100k jobs a month to keep up with population growth. Average monthly job gains have been about 180k this year, which she has described as "unsustainable." The employment report was the last before the Fed's next policy meeting on November 1-2. Investors see almost no chance of a rate increase at that meeting given how close it is to the election.
- Gold rose for the second straight session on Monday, after falling in the preceding eight, buoyed by post-holiday buying in China and a weaker dollar, while a slowdown in U.S. job growth bolstered expectations that U.S. interest rate hikes would only be gradual.
- Bullion touched a four month low of 1,241.20 on Friday. spot gold ended about 4.5% lower last week, its biggest weekly decline since November 2015. The possibility of a near term rate hike weighed on gold much of last week but the U.S. jobs data brought some relief and prompted an almost immediate rally. Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.
- The safe haven asset was fairly subdued in its reaction to the second U.S. presidential debate between Democrat Hillary Clinton and Republican Donald Trump. Financial markets saw less chance of a victory by Trump in his U.S. presidential bid amid a scandal over vulgar comments he made about women.
- In our opinion spot gold may break the resistance at USD 1,272 per ounce soon and edge up to the resistance area of USD 1,291-1,297.
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USD/CAD: Two Major Hurdles Ahead: 1.3305 And 1.3312
- The unemployment in Canada was recorded at 7% in September of 2016 unchanged from August. The figure came in line with consensus as more people participated in the labour market (+69k) while employment rose (+68k) and the number of unemployed persons barely changed.
- The economy created 67.2k new jobs last month, handily topping the increase of 10k that the market had forecast. But 50.1k of those jobs went to Canadians who consider themselves to be self-employed, the biggest monthly increase since June 2009.
- For the third quarter, job gains were up just 0.3%, following little change in employment in the second quarter and a 0.2% improvement in the first.
- The Canadian dollar strengthened against the greenback following the report. Traders were also absorbing the U.S. jobs report, which showed employment growth there unexpectedly slowed for the third straight month. The USD/CAD is still above 7-day exponential moving average, which suggests that a rise from last week may be continued. There are two major hurdles ahead – 1.3312 (38.2% fibo of 1.4689-1.2461) and the weekly cloud base at 1.3305.
