What's Driving Precious Metals - Weekly Economic Analysis March 9, 2018

By Treasure Coast Bullion Group - 

  • Non-farm Payrolls Surge
  • Gold prices rebound on Subdued Wage Growth
  • The ECB removed their accommodating mandate

Gold prices rebounded from the weekly lows on Friday, following a stronger than expected non-farm payroll report released in the U.S. on Friday. Traders had been waiting for this number all-week, with a keen eye on wage growth.  The change in gold prices has been moving in lockstep with the EUR/USD which rebounded after declining most of the week.  The European Central Bank (ECB) met on Thursday and changed their forward guidance which now paves the way for an exit from quantitative easing.

Non-farm Payrolls Were Stronger than Expected

The Department of Labor reported on Friday, March 9 that non-farm payrolls increased by a whopping 313k, compared to expectations that it would rise by 210K.  The January number was revised higher to 239K from 200K.  The overall revision over the last 2-months was 54K. The average hourly earnings, which reflect wage gains, increased by 0.1% compared to expectations of a rise of 0.3%. This left year over year wage gains at 2.6%, compared to the 2.9% expected. In fact, the whisper number was 3%.

The Unemployment Rate was Strong

The unemployment rate was steady at 4.1% for a 5th straight month. This is somewhat deceiving as the labor-force participation rate rose to 63.0% from 62.7%. With more people looking for jobs a stable rate is a higher number. The labor force increased 806k, the most since the early 80s, after January's 518k climb, with household employment 785k higher following the prior 409k gain. Government employment was up 26k, with the Federal shedding 7k. Overall this was a very solid report, showing that job gains are very strong, and wages are subdued.

The ECB is Poised to Exit

The ECB left official rates unchanged at Thursday’s council meeting and confirmed that their bond purchase program would run until September at 30 billion Euro’s per month. Going forward the European Central Bank has removed part of its easing bias. They will no longer attach the mandatory extending of QE regarding duration and size.

The ECB also said that rates will remain at current levels for an extended period.  President Mario Draghi confirmed that the decision to alter the guidance on bond purchases was unanimous. At the same, time Draghi also stressed that inflation, although at subdued levels, could continue to increase if the central bank is not vigilant.  

Canadian Employment Increased

The U.S. was not the only country on Friday that posted solid jobs data. Canada employment grew 15.4k in February after the 88.0k drop in January. Full-time employment fell 39.4k after a 49.0k gain. Part-time jobs improved 54.7k after plunging 137.0k. The unemployment rate was 5.8% in February from 5.9% in January. The participation rate was 65.5%, unchanged from the 65.5% in January. Hourly earnings for permanent employees, slowed to a 3.1% year over year pace from 3.3% year over year. The resumption of job growth and decline in the unemployment rate is encouraging, but the drop in full-time jobs undercuts the report, backing the widely cautious policy tact from the Bank of Canada this year.

Gold prices have been trading sideways for the past 3-months and have had a difficult time making higher highs or lower lows. The range between 1,308 and 1,360 has held steady as traders wait for either higher inflation or a weaker greenback to push gold prices to the next level. The Fed’s Evans was on the tape on Friday that he is interested to see what February inflation figures show now that the employment report is in the rear-view mirror.

If you are looking to take advantage of a time to add precious metals to your portfolio, click on this link to get access to your Investment Kit or better yet, give us a call today at 800–982–6105.

Good Investing,

Treasure Coast Bullion Group 




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