Gold price pushing higher following another disappointing employment report, 194K jobs created in September

By Kitco News / October 08, 2021 / www.kitco.com / Article Link

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here! (Kitco News) -Gold prices are pushing higher as the U.S. labor market showed further weakness as fewer American's found jobs in September, potentially putting a crimp in the Federal Reserve's plan to shift its monetary policy before the end of the year.Friday, the Bureau of Labor Statistics said 194,000 jobs were created last month. Economists were expecting to see job gains of around 490,000. This is the second consecutive month employment has missed expectations.The gold market was in positive territory ahead of the data and has added to its gains. December gold futures last traded at $1,700.00 an ounce, up 0.61% on the day.Although the headline number was significantly weaker than expected, the report noted some positive trends. The unemployment rate fell to 4.8% in September, down from August's reading at 5.2%. Economists were expecting the unemployment rate to fall to 5.1%.August's disappointing employment numbers were also revised higher. The report said that August's employment numbers were revised to 366,000, an increase of 131,000 jobs from the initial estimate. July's data was also revised higher to 1.091 million, up from the previous estimate of 1.053 million.Positive for the gold market, wage inflation continues to pick up. The report said that wages in September increased by 19 cents or 0.6%, up from August's 0.6% increase. "The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages. However, because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earnings," the report said.Economists will now be asking whether or not the latest employment data changes the Federal Reserve's plans to reduce its monthly bond purchases before the end of the year.The U.S. central bank has said that a healthy labor market is a critical target to determine the path of monetary policy.Katherine Judge, senior economist at CIBC, said that the Fed could still be on a course to taper its monthly bond purchases."Overall, this report suggests that there is enough private sector momentum that a QE tapering is still likely to be announced at the November FOMC," she said.Andrew Hunter, Senior U.S. economist at Capital Economics,said that September’s employment report is probably “decent” enough for the Fedto start tapering its bond purchases before the end of the year.However, he noted that it the data is not strong enough to warranta rate hike anytime soon. He also warned that inflation pressure will be a lotstickier than the central bank currently expects.“Alongsidesigns that activity growth is slowing sharply, at the same time as worseninglabour shortages are putting serious upward pressure on wage growth, it looksset to leave Fed officials in an uncomfortable position over the coming months,”he said.Whiletapering is still on the table, commodity analysts at TD Securities said thatgold could see some short-covering as investors start to price the Fed’s inevitableshift in monetary policy further down the road.Lookingat U.S. monetary policy, the analysts said that there are plenty of reasons tohold gold.“Lookingbeyond Fed pricing, higher wages and no rise in participation rate will keepthe stagflation theme alive, and gold could be an ideal hedge against theserising stagflationary winds,” the analysts said. “As the global energy crisisintensifies, impacting the production of goods across the world and supplychains across Europe and Asia, reasons to own the yellow metal are growing morecompelling.” By Neils Christensen For Kitco NewsFollow neils_Cnchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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