RE:Understanding Today's Move in Gold
02-May (USAGOLD) — Gold initially slipped on the heels of this morning’s better than expected headline jobs numbers for April. However, the market found some of the underlying data disappointing and some level of uncertainty emerged, and the intraday losses were quickly reversed. The latest rise in tensions between Russia and Ukraine likely contributed to the rebound in the gold price as well.
The headline nonfarm payrolls number came in at +288k, well above market expectations of +210k. The jobless rate fell to 6.3%, on expectations of 6.6%. Pretty good, right?
On the surface it is indeed pretty good: It was the highest number of monthly jobs gains since January 2012. And the unemployment rate reached its lowest level since September 2008.
However, the household survey showed a loss of 74k jobs in April. More significantly, workers within the prime age group of 25 to 54 saw a loss of 209k jobs.
The greater than expected drop in the jobless rate was explained by a disturbing plunge in the labor force participation rate to 62.8%, matching a 35-year low. A whopping 806k Americans dropped out of the labor force in April. That’s the biggest drop in the labor force since the 848k tumble in October. Before that, according to a MarketWatch article, “you have to go all the way back to 1981 to find another 800,000-plus decline.”
From that same MarketWatch piece:
The number of so-called re-entrants – unemployed workers who have started looking for jobs again – fell by a whopping 417,000. That’s the biggest drop since the government began keeping records in 1967.
The bottom line is that it didn’t take much scratching at the surface to undermine those headline numbers. Stocks gave back their intraday gains and then some. U.S. Treasuries retraced all of their intraday losses. Yields are now negative on the day.
Heightened geopolitical tensions in Ukraine also prompted renewed buying interest in gold as a safe-haven. The Ukrainian military reportedly launched a new operation against pro-Russian separatists in the eastern city of Slaviansk. That action was met by resistance, including surface-to-air missiles, which took-down to Ukrainian military helicopters.
Ukraine’s acting President Oleksandr Turchynov said that two Ukrainian soldiers were killed and seven were wounded in the latest fighting. He also said there were “many insurgents dead, wounded and arrested.”
A spokesman for Russian President Vladimir Putin, said that the Ukrainian offensive “effectively destroyed the last hope for the implementation of the Geneva agreements.” In reality, that agreement was basically dead on arrival two-weeks ago.
Nonetheless, Russia called for an emergency meeting of the UN Security Council. It would be the thirteenth such meeting since the crisis began and there is little hope for an consensus as parties on both sides of the conflict have veto powers.