On Friday morning, gold futures for June delivery declined to just under $1,627 per ounce, while silver futures slipped under $30. However, both precious metals managed to rebound after the latest unemployment report.
Job growth in the United States slowed again in April as the economy remains sluggish and more people dropped out of the work force. According to the Labor Department, nonfarm payrolls increased by 115,000 last month, compared to estimates close to 170,000. Private companies added 130,000 jobs, with the majority coming from the service sector. Manufacturing jobs increased by only 16,000. The average hourly earnings increased 1 cent to $23.38 and is up 1.8 percent from last year. The average workweek remained unchanged at 34.5 hours.
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“The very modest 115,000 increase in U.S. nonfarm payrolls in April will raise fears that the recovery is fading fast, just like it did at this time last year,” said Paul Ashworth, chief U.S. economist at Capital Economics, according to WSJ. Although the unemployment rate ticked down to 8.1 percent in April from 8.2 percent in March, the labor force participation rate is cause for concern. The rate dropped to almost 64 percent, its lowest level since 1981. According to Zero Hedge, the number of Americans not considered in the labor force fell by 522,000 people and now stands at 88,419,000, the highest level on record.
While the short-term trend seems to be that bad economic data is good for stocks and commodities, as it brings financial markets closer to additional monetary easing from the Federal Reserve, the results appear to not be weak enough for investors. The Dow Jones Industrial Average and the S&P 500 both fell more than 1 percent, while the Nasdaq declined almost 2 percent. Aside from gold and silver, commodities such as oil also experienced a sell-off. Crude oil slid 4.4 percent to $98 per barrel, its worst one-day decline of the year.
After the unemployment report, gold and silver immediately rebounded to as high as $1,648 and $30.48 per ounce, respectively. In afternoon trading, both precious metals traded off from their intra-day highs, but still outperformed the broader market. This is an encouraging sign for precious metal investors who have been patiently waiting for gold and silver to return to their safe-haven trading ways.
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Disclosure: Long EXK, AG, HL, PHYS