Stronger US non-farm payrolls sees gold retreat

Friday, October 03, 2014

Global equity markets rebounded on Friday as benchmark indices on both sides of the Atlantic recovered some of the week’s precipitous declines. Investors were enticed back to the market after the week’s heavy sell-off offered a buying opportunity at the lower levels and European stocks in particular were buoyed in the morning by the expectations of strong jobs data.

As anticipated by the majority the US data didn’t disappoint with non-farm payrolls adding 248K positions in September, well above the 215K expected by market participants and the previous month’s reading of 180K. Investor optimism was further boosted by the surprise decrease in the unemployment rate, which fell to 5.9% in September against expectations of 6.1%, unchanged from the previous month. Rounding up the bullish session for macro data both the Markit services PMI and ISM non-manufacturing PMI reading exceeded expectations, as US service sector growth capped it’s best quarter since 2004 as the Markit PMI reading improved to 59.0 from 58.8 previously while the ISM reading just beat expectations of 58.5, coming in at 58.6 in September.

The solid data saw both the S&P 500 and DJIA trade higher from the open with both indices up between 0.8%-1.1% at the time of writing. The dollar index posted substantial gains as the greenback added 1.2% against its major peers, breezing past the recent high at 86.218 to set a fresh four-year high towards 86.682 as investors speculated that the large fall in the unemployment rate would prompt the Fed to act sooner rather than later with regard to the eventual increase in the interest rate.

The stronger than expected economic data saw a renewed appetite for risk among investors, with gold prices selling off sharply today as investors pulled out of the perceived safe haven in search of higher yielding assets. Spot prices drifted lower throughout the morning but registered sharp declines towards the end of European trading, declining almost 1.8% throughout the day as the yellow metal traded towards $1,192/oz for the first time since the 31st of December last year. 

Non-farm payrolls exceed expectations in September

NFP TCH Index US Employees On N 2014 10 03 14 58 35

DXY rallies to a fresh four year high

DXY Curncy DOLLAR INDEX SPOT 2014 10 03 15 47 10

Spot gold prices fall to fresh year-to-date low

XAU Curncy Gold Spot Oz 2014 10 03 15 36 54

More from: Kash Kamal