US Jobs Drag Gold Price Downward

Friday, May 6, 2016

price of goldThe price of gold is starting to climb yet again - and for good reason. Recent economic data out of the United States proved to be incredibly concerning. Consequently, it is causing investors to push toward gold. Today, we'll talk about the US economic data that was released, what this has to do with the price of gold, and what we can expect to see from gold moving forward.

US Jobs Report Was Shocking!

As mentioned above, gold is climbing as a result of an incredibly poor piece of economic data out of the United States - the jobs report. In the month of April, it seems as though companies started to scale back on hiring with the United States adding about 160,000 new jobs to the economy. While this seems like a big number, this is well below what was expected. In fact, economists were expecting the United States to add 203,000 jobs to the economy. Not to mention, the number came in lower than a key benchmark, signaling economic struggle.

You see, when an economy is doing well, that is generally displayed in the growth of jobs. After all, when economies are doing well, companies tend to sell more products and services, leading to a need for more employees to fulfill orders. With that said, the United States economy is considered to be doing well when it is consistently adding at least 200,000 jobs to the economy on a monthly basis. So, April's number of 160,000 was incredibly disappointing.

What Does This Have To Do With The Gold Price?

While it may seem as though the state of the United States economy and gold's price are two completely different stories, you would be surprised to see how correlated they actually are. The reality is that gold is priced using the United States dollar. Therefore, when we see movement in the value of the USD, the price of gold moves in the adverse direction. That's because when the USD is up, the price of gold in nations outside of the United States climbs, leading to declines in demand. When the USD is down, as is the case, thanks to the poor jobs report, the value of gold climbs as lower costs in nations outside of the United States leads to increased demand.

It's also important to remember that gold is largely considered to be a safe haven investment. Therefore, when economic conditions are concerning, as the jobs report proved they currently are, we can expect to see gains in safe haven demand, leading to spikes in gold's value.

What We Can Expect To See From Gold Moving Forward

Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from the value of gold. The reality is that, as a safe haven investment, gold is in incredibly high demand at the moment. After all, market conditions are concerning, to say the least, and if I was to say that I wasn't worried about the global economy, I would by lying.

The increase in demand from safe haven investors will likely continue with heavy momentum. That, on top of the supply data we've seen in gold recently, is setting the stage for a perfect storm of upward movement. All in all, things are looking great for gold investors at the moment. 

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.