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Why is all this job data important anyway?

Last Friday the gold price had 1.1% wiped off its value, which saw it end the session at $1,209.70, its lowest since March 15. The main reason for this was a much higher than expected gain in US jobs last month. As we reported here, an extra 41,000 jobs than initially predicted were added to the economy.

The rate of employment growth

Aside from “smashing” expectations, the nature of the job increases were notable. In a similar pattern to May, just under half were created in health, education, and professional services. However in June a sizeable 35,000 government jobs were added, and the rest made up of financials, construction, trade and mining.

Good employment data is especially important this month as it coincides with Janet Yellen’s testimony to Congress’ Joint Economic Committee on Thursday. As well as making the greenback look relatively attractive, which puts downward pressure on the gold price, it contributes to a broad perception of an economy doing well, thus encouraging central banks to increase interest rates. Whilst a rate hike is borderline certain, the timing is not; data packages such as these can tip the balance in favour of a hawkish sentiment for the Federal Reserve.

Moreover, sectors such as construction and mining are long-term projects and are thus more sensitive to interest rate fluctuations; if the Federal Reserve feel there is uncomfortably high activity in those sectors, it will factor in much more to monetary policy decision making.

Less than two weeks after the “fat fingered” flash crash in the gold markets, silver suffered a similar fate. Last Friday saw silver futures for September and December drop suddenly to a 15-month low after a $450m trade of 25m ounces, losing a dollar off their value. Whilst this may not seem like a notable figure it represents an 11% drop.

Silver’s “shock drop”

Some commentators say the “fat finger” epidemic is the result of lazy use of automated trading, but what is puzzling is that it seems to be affecting the metals markets rather than the main ones. The crash happened in the early hours of Japanese trading, so the fault looks likely to have come from Tokyo.

Photo credit: AndreyPopov

Link to this article: : http://www.goldmadesimplenews.com/analysis/why-is-all-this-job-data-important-anyway-13268/

Posted by on Jul 11 2017. Filed under Analysis, Gold News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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