Gold Futures Rise; Interest Rate Hike Even Less Likely

The United States Bureau of Labor Statistics released its nonfarm payrolls data heading into the Labor Day weekend, and less than three weeks before the Federal Reserve meets to consider an interest rate hike. Analysts appear unanimous in agreeing that these jobs data decrease the chance for an increase, if not eliminating it altogether. Fed funds futures contracts imply the odds of a September hike have dropped from 3 to 1 to 5 to 1.

Weak in the Details

While the August jobs report indicated employment gains and unemployment at a stable rate (4.9%), it also betrayed lower averages in hours worked and earnings. The job gains (151,000) also fail to impress, falling short of expectations (180,000). The same applies to the unemployment rate which was predicted to decline at least a tenth of a percent.  Less visible in the details was the level of temporary jobs which is considered an indicator of future hiring. That statistic fell by 3,100. Top Federal Reserve officials, both Chair Janice Yellen and Vice Chair Stanley Fischer had recently indicated that this report would play a role in their considerations of whether the US economy could tolerate an interest rate hike this year.

Fed Forecast Reaching “Final Jeopardy”

Flash back to December 2015: the Federal Reserve emerged from its year-end meeting declaring that they expected not one, not two, but four interest rate hikes in 2016. The failure of the jobs economy to improve measurably and meet basic expectations once again has, according to analysts, virtually eliminated the possibility of a September increase, bringing the number of hikes in 2016 to exactly zero. Their meeting this month may choose to lump the August numbers in with those from July, which were promising enough to perhaps call the employment situation a “mixed bag.” The present consensus, however, is that eyes will turn hopefully to December and the prospect of a face-saving boost to the rate. “One out of four ain’t bad.”

Gold Continues to Rise

Both futures and spot gold started to bump up just before the jobs numbers were released, as did silver and the other precious metals. Shortly after the report, gold had increased in value by a full percentage point, bringing its advance in 2016 to nearly 25%. Silver leapt up a full 2%.

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