FEB Gold Report: Job Report’s Impact on Gold Price

FEB Gold Report: Job Report’s Impact on Gold Price


Last Friday’s two-and-a-half percent drop
of the COMEX gold price capped what has been a difficult week in the precious metals sector.
Despite bullish fundamentals for safe-haven assets, including geopolitical conflicts involving
Islamic extremism, Ukraine, and serious concerns regarding the sustainability of a Greek bailout
program that threatens to undermine the integrity of European Union mandates, an increasingly
strong U.S. dollar index has leveraged the most weight towards investor sentiment. This
has led to speculation amongst several key players on Wall Street that the Federal Reserve
may raise interest rates as early as June, which in turn has created a virtually unanimous
forecast for gold volatility for the immediate future. Further confirmation of gold market bearishness
came in the form of the recently released January jobs report by the Department of Labor,
which revealed that employers added 257,000 jobs last month, which according to the International
Business Times marked the longest stretch of job gains above the 200,000 level since
1994. Although the figures present a seemingly positive perspective of the labor market,
a deeper contextual framework into the data suggests a rather sharp contrast. Information
compiled from ADP, one of the world’s premiere human capital management companies, demonstrates
that hiring velocity amongst large companies peaked in May of 2010 and since then, the
overall trend within this category has declined. This is an absolutely critical metric that
cannot be ignored since “big business” accounts for the majority of commercial endeavors within
the United States and has substantial implications for global economic capacity. It also raises
questions regarding the thorny issue of wage growth, which has remained stagnant for several
years and may continue to plague the employment landscape if the most successful of U.S. companies
are unwilling to fairly compensate their workers. While near-term trading activity based on
popular sentiment may temporarily hinder gold valuations, the true fundamentals of the economy
remain especially positive for the bullion market. With so much chaos on the global stage, a
significant premium will be paid for stability. Gold has withstood all of the economic disasters
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