It’s been another quiet week for the precious metal complex, with gold oscillating around the USD $1200oz mark, and silver sitting just above USD $16.30. This is down a touch on last Friday’s London PM fixes, which saw gold at USD $1214 oz.
We’re not surprised to see this calm before a potential storm, with the market focused on the non-farm payroll report, which will be released tonight Sydney time.
As it stands, the market is expecting that the United States about 240,000 jobs, with the unemployment rate tipped to hit 5.6%.
Whilst predicting this number is a complete lottery, and it is subject to revisions all the time, we wouldn’t be surprised to see the number underwhelm this time around, with nearly all US macro data released this month underwhelming market expectations, suggestive of a broad based slow-down in the US economy.
Even this week, we’ve seen
• Personal income growth of just 0.3% for the month, lower than expected
• Personal spending declining 0.2%, worse than expected
• Construction spending fall by 1.1%. The market thought it would rise
• ISM manufacturing decline to 52.9 points, suggesting slow expansion only
• Declining factory orders, when again the market thought it would rise
• ADP employment growth of just 212,000 jobs, below expectations
That ADP figure had fallen by 70,000 jobs since November last year, with a noticeable down trend since it peaked then. That’s a worrying sign.
Maybe the most alarming of all reports out this week though was the 50,000 job cuts announced in the latest Challenger, Gray and Christmas report. Whilst this was a decline in job cuts compared to January 2015, the number was 20% higher than job cuts from a year ago. It marked the third month in a row that the current lay off plans exceeded those from the same month in the previous year.
Oil is to blame, with nearly 40% of all job cuts due to the declining oil price. As many people are aware, it has been the stunning of growth of US shale oil that has been behind much of whatever growth the United States has generated in the last couple of years.
This trend is now sharply reversing, as much of this oil is uneconomic at today’s prices.
