US employers added 336k jobs versus the forecast of 170k jobs in September as a two-month payroll net revision was noted at +119k. The unemployment rate came in at 3.8%, which was slightly higher than the estimate of 3.70%. The US hourly earnings were up 0.20% on a m-o-m basis, whereas earnings rose 4.20% y-o-y. Both the readings fell short of their respective forecasts by 0.10% each. Average weekly hours for all employees matched the forecast of 34.40. The labour force participation rate remained unchanged at 62.80%, which may be a cause of concern as wage inflation may remain elevated.
The US dollar index fell despite a higher than expected number of job additions as the markets focused on the data of hourly earnings and unemployment rate. Risk assets rallied on the notion of a soft landing possibility, which pushed the Dollar Index lower, thus helping gold recover from its day’s low of $1,810 to close with a gain. The metal was down 1.75% on the week. The ten-year US yields closed at 4.80% with a weekly gain of around 5%, while the two-year yields at 5.08% were up 0.60% on the week. The US Dollar Index at 106.10 was down 0.10% on the week.
The US data released in the week were mostly upbeat: ISM manufacturing was noted at 49 as against the forecast of 47.90; ISM manufacturing performance jumped back into the expansion zone; JOLTs job openings at 9610k jobs versus the estimate of 8815k jobs were a 4 standard deviation beat; factory orders at 1.20% topped the forecast of 0.30%; ISM services Index at 53.60 beat the forecast of 53.50; initial jobless claims and continuing claims were better than expected.
Yields on 10-year TIPS have risen to the highest level since 2008, which is clearly bearish for the yellow metal.
Manheim’s used vehicle index and the possible impact of auto workers’ strike add to the inflation concerns. Manheim’s Index was up 1% in September. Used cars carry a 3% weighting in overall US consumer prices.
The 2-10 year yield inversion reached the lowest level this year after the release of the US nonfarm payroll report.The US is expected to issue huge debt, which in turn will make investors call for higher yields in return for buying the US debt as the term premium will rise. It means that the bonds will continue to face pressure. The US federal deficit is widening even when the US economy is doing well. The US Congressional Budget Office expects the US annual shortfall will eventually grow to $2.90 trillion in 2033.
Federal Reserve Bank of San Francisco President Ms. Mary Daly said that the policymakers can hold interest rates steady if the labour market and inflation continue to cool or financial conditions remain tight. Federal Bank of Richmond President Thomas Barkin holds the opinion that the surging US treasury yields reflect strong economic data and a heavy supply of bonds.
Total known global gold ETF holdings fell for the sixth consecutive day through October 5 as investment demand remains lacklustre.
Next week, investors will focus on the US PPI (September), FOMC minutes, CPI (September), and University of Michigan consumer sentiment and inflation expectations. Out of Europe, Germany’s CPI, industrial production; Euro-zone’s Sentix investor confidence; and the UK’s monthly GDP will garner attention. China’s trade balance and CPI data will entertain the traders further.
The US bond market is closed Monday on Columbus Day, thus a vital clue to the markets will be missing.
Gold is expected to be range-bound as $1,850 is a strong resistance level. Support is at $1,800. Overall, my outlook is weak.