No FED hike – go Gold spike!

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US Fed Cleveland

Towards the end of last week, the yellow metal went up to 13-moths highs due to the increased expectation of a slow in Fed’s monetary policy pace, which is based on the stagnation of hourly wages last month. The trading range was broad on Friday when the spot lingered in the $1,251.30 and $1,280.60 per ounce area, to settle at $1,270.90 for the day, meaning up $12.70 per ounce or 1.01%. The top of the day’s trend reached the highest level since 2015’s February. Following January’s pace, gold went up 10% in February, the commodity being on the path of marking the stronger quarter in the last three decades. The new support was set at $1,063.20 (4th of January’s low) while the resistance was reset to $1,280.60 (3rd of February, 2015 high).

The US Labor Department released on Friday the latest jobs report. The data was overall positive, but investors focused on a minor 0.1% decrease in the average hourly earnings for the month of February.

In January, the indicator registered a 0.5% growth, but the decline of last month is the first one since the end of 2014. As the US’s economy is in continuous recovery since the Great Recession, the FOMC (Federal Open Market Committee) is especially interested in the wage growth pace. This setback might be the trigger in delaying Fed’s supposed rate hike after the first half of 2016. In December 2015, we should remember that Fed raised the monetary policy interest rate by 25 basis points, from 0.25% to 0.5%.

From the gold’s perspective, any rate hikes coming from the US monetary policy officials will be viewed as bearish. In this perspective, the yellow metal would have to compete with high-yield assets in an environment of rising rates.

The other part of the US Labor Department release consisted in the non-farm payrolls, which went up 242K in the month of February, significantly over the expected 190K and also beating January’s upwardly revised 172K figure.

The sectors which gained the more jobs were: Health-Care, Food Services, Drinking Places and Social Assistance while the Mining sector lost jobs. Since 2015’s December, the US economy produced an average of 225K jobs/month. For which regards the unemployment rate, the figure remained unchanged at 4.9% monthly, after reading its lowest level in 8 years in the month of January. The famous U-6 rate, which regards the number of jobs marginally related to the labor market, went down 2 basis points to 9.7%, compared to 18% at the peak of the economic crisis (in 2010).

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Technical Strategist, CMT level 2 (MTA). Looking for good opportunities in the market, wherever they are, since 2009.

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