USAGOLD/Peter Grant/08-07-17
Gold is consolidating at the low end of Friday’s range. The yellow metal is being underpinned by the dollar’s inability to build on the rebound triggered by Friday’s better than expected headline jobs numbers for July.
However, wages remain sluggish and there continues to be some troubling data under the surface: The broader U6 unemployment rate was 8.6% in July. While that’s down significantly from the post-recession highs, it’s still higher than the pre-recession lows. The labor market participation rate has been unable to rebound. The participation rate for the key 25 – 54 year-old demographic is 81.5%, well below the 83.2% reading from before the recession.
The article from BusinessInsider I posted earlier today is a nice summary of these data.
As an aside, Janet Yellen’s favored Labor Market Condition Index for July was supposed to come out today. It did not. With no fanfare, the Fed announced in a note last week that the series had been discontinued.
I find myself wondering if the data that was to come out today would have taken LMCI negative. One thing is for certain, the indicator never confirmed the Fed’s contention that the U.S. labor market is gloriously near or at full employment. Consequently, it has been kicked to the curb.
Make no mistake though, jobs are the least of the Fed’s worries at this point. Rather they are focused on inflation; more specifically the absence there-of.
“Recent inflation outcomes have been unexpectedly low, below the inflation target of 2 percent,” said St. Louis Fed President James Bullard today. According to Bullard, the Fed is having a hard time finding an explanation for the low inflation era. That must be particularly troubling for the central bank, which ran up their balance sheet to more than $4 trillion with the expressed goal of generating 2% inflation. Hint: They should look at stocks, bonds and housing for the inflation they don’t see elsewhere…
Fed is done with rate hikes in 2017. Strong jobs report irrelevant. Jobs were “mission accomplished” long ago. The issue now is disinflation pic.twitter.com/XXbI5FwceG — Jim Rickards (@JamesGRickards) August 5, 2017
Fed is done with rate hikes in 2017. Strong jobs report irrelevant. Jobs were “mission accomplished” long ago. The issue now is disinflation pic.twitter.com/XXbI5FwceG
— Jim Rickards (@JamesGRickards) August 5, 2017
The Fed is almost assuredly going to hold steady at their meeting next month. While the odds of a rate hike in December remain around 50%, the rumblings of a pause for the remainder of the year are growing louder.
That would keep the dollar under pressure, as markets reverse out the rate hike expectations fostered by the Fed through the June meeting. That will be good for gold. As worries about disinflation and even stagflation mount, gold will get an additional boost from safe-haven buying.
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