Price of Gold Fundamental Daily Forecast – Listening to Fed Pays Off for Gold Bulls Amid Jobs Market Miss

Gold futures are soaring on Friday after a government labor market report came in well-below expectations. This means the Fed is right in saying the economy is still too weak to begin tightening policy. This thought is greenlighting the huge intraday rally in gold.

Treasury yields plunged on the news, pressuring the U.S. Dollar, which drove up foreign demand for dollar-denominated gold.

At 12:47 GMT, June Comex gold is trading $1839.40, up $23.70 or +1.31%.

US Job Growth Far Below Expectations in April Amid Labor Shortages

U.S. employers hired far fewer workers than expected in April, likely frustrated by labor shortages, leaving them scrambling to meet booming demand as the economy reopens amid rapidly improving public health and massive financial help from the government, Reuter wrote.

Nonfarm payrolls increased by only 266,000 jobs last month after rising by 770,000 in March, the Labor Department said in its closely watched employment report on Friday. Economists polled by Reuters had forecast payrolls advancing by 978,000 jobs.

The unemployment rate rose to 6.1% in April from 6.0% in March. The jobless rate has been understated by people misclassifying themselves as being “employed but absent from work.” Millions of Americans remain out of work and many have permanently lost jobs because of the pandemic.

Daily Forecast

Although the jobs report miss won’t derail the economic recovery, it does highlight the fact that it is going to take a long time to get the labor market back to pre-pandemic levels. The news essentially supports what the Federal Reserve has been telling us.

Today’s huge downward spike in Treasury yields was the catalyst for the pop in gold prices. The move drove yields back to levels not seen since early March. It also suggests that bond investors are starting to believe what the Fed has been telling us.

Earlier in the week, Boston Federal Reserve Bank President Eric Rosengren said “significant slack remains in the economy” and made it clear it is too soon to start talking about reducing the Fed’s asset purchases.

“We need to have a substantial improvement for us to begin tapering. It is quite possible that we’ll see those conditions as we get to the latter half of the year,” Rosengren said. “But right now what we have is one really strong employment report, one quarterly strong GDP report. And so I think it’s premature right now to focus on the tapering.”

It looks like the bond traders got this one wrong so congratulations to the gold bulls who stuck with their convictions about the strength of the economy. Today’s jobs data miss probably bought them more time to do some serious damage to the upside.