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Gold has held firm in the face of strong labor market report which saw initial jobless claims drop from a one-and-a-half year high last week as expected.

Key Takeaways

• The number of people applying for jobless benefits in early February dropped by 19,000 to 234,000 in total for the week ended February 02.
• The 16-month high seen the week before was likely the result of a holiday-related data anomaly, with a Californian teacher’s strike and the government shutdown also possible influencing results.
• The less-volatile 4-week moving average was 224,750, a two-month high and an increase of 4,500 from the previous week's unrevised average of 220,250.

Last week’s figures are still actually higher than expected, with many analysts predicting a full recovery and common consensus landing at 225,000. The less-volatile monthly average also increased to a two-month high, perhaps indicating a trend reversal in the labor market. However, it is worth noting that the weekly and monthly averages are still near historically low levels overall.

The number of people already collecting unemployment benefits (continuing claims) dropped by 42,000 to 1.74 million, standing at 1.91 million this time last year.

Holiday season commonly interferes with long-term jobless-claims data due to the tendency for many companies to take on temporary employees to accommodate for the short-lived increased consumer demand, letting the workers go afterwards and leading to a volatile short-term reading.

A teacher’s strike in California also may have boosted the number of jobless claims short-term, and the government shutdown could have caused turbulence as it did in data collection for many other reports, although the US government has officially stated that the shutdown did not impact jobless claims reports.

The Labor Department’s efforts to seasonally adjust figures may have gone awry this time seeing as new claims jumped from a 50-year low of 200,000 to a 16-month high of 253,000 in just two weeks.

Overall the labor market seems to be in good health, bolstering weaker areas of the US economy at times according to recent reports on manufacturing and housing. The US jobs market defied expectations by adding 304,000 new positions in January with the US on track to set a new record for the longest period of economic expansion in the nation’s history come summertime.

Although both initial and continued jobless claims fell by less than expected and their 4-wk averages continued to climb, we do not think they signal a change in labor demand over the short term. That said, we are watching for a meaningful break above the 52-wk range (205k-235k) pic.twitter.com/EWQdAHjvho

— Jeoff Hall (@JeoffHall) February 7, 2019

Expert Outlook

Federal Reserve Chairman Jerome Powell said on Wednesday that “the U.S. economy is now in a good place.” The Fed has announced intentions to maintain current interest rates and exercise patience in lifting borrowing costs further, acknowledging the uncertain outlook for the US and world economies at the moment. The central bank retracted a recent statement regarding risks which had described them as “roughly balanced”.

Market Reaction

Gold initially ticked downward following the somewhat mixed labor market data which shows a significant drop in jobless claims which nevertheless failed to meet expectations of healthier figures.

However, the precious metal has rallied back near session highs and is now up 0.05% - gold last traded at $1,310.15/oz with a high of $1,311.97/oz and a low of $1,302.71/oz, almost testing the $1,300 line of support but not quite sinking that far. April Comex Futures are down -0.05% today, last trading at $1,308.9/oz.