Gold climbed to $1220 an ounce in early morning trading today to reach a three week high after newly released data showed that domestic jobs growth was reported to be rising at the slowest level in over a year. As a result, the Federal Reserve is now expected to delay a widely anticipated interest rake hike this summer.
Given that higher interest rates are a major plus for interest rate bearing assets, this anticipated delay is a major positive for precious metals and the reason for this morning’s spike in gold prices. The jobs and interest rate news was also reflected in the nearly fifty cent move in silver this morning, up to $17.46 an ounce.
The employment data shows that U.S. non farm payrolls grew by only 126,000 jobs in March, which is less than half of the job gains that were created in February. The March employment number is also the weakest gain since December of 2013.
According to the U.S. Department of Labor, the weak March jobs number marked the end of twelve consecutive months of jobs growth over 200,000. That streak of consecutive jobs growth was in fact the longest such streak in the last two decades, the previous one having ended in 1994.
The end result of the jobs market data as it relates to gold is that any delay in an interest rake hike, which hasn’t happened since 2006, would bolster gold’s appeal as a safe haven investment. The U.S dollar would most likely be weakened as traders step back from rising interest rate bets, and a weaker $USD would make dollar denominated gold cheaper for international investors buying with other currencies.
With the domino effect of employment data and interest rate movement now in full swing, the next step up for gold is $1300, and that could happen sooner than we think. This presents a nice buying opportunity for precious metals investors.
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