Traders Take Profits After Report Reveals Strong US Job Growth

US Labor Market Adds 253,000 New Jobs Despite Fed’s Efforts to Slow Economy

Today the U.S. Labor Department released the nonfarm payroll jobs report which revealed that the labor market is robust as well as resilient considering the massive campaign by the Federal Reserve to slow the economy by raising rates to over 5% in just over a year. Today’s report beat estimates and suggests that the economy in the United States continues to be strong with 253,000 new jobs added last month.

The report also showed that the unemployment rate fell to 3.4% down 0.1% when compared to the prior month. In addition, the report revealed that wages rose. The unemployment rate of 3.4% matches January’s level with both months being at a level not seen since 1969.

According to the New York Times, “Job growth was broad-based, even if less vigorous than the eye-popping numbers of 2022 when the nation was rapidly digging out of a deep pandemic deficit. Leisure and hospitality added 31,000 jobs, down from a 73,000-job average over the past six months but another step toward its high in early 2020.”

Market Reaction

Market participants used the jobs report to actively engage in U.S. equities taking all three major indices higher. The Dow Jones industrial average gained 1.65%. The Standard & Poor’s 500 gained 1.85%, and the NASDAQ composite gained 2.25% in active trading today.

Gold Prices Drop as Investors Take Profit Despite Strong Fundamentals

Gold investors and traders also used this report as a reason to pull profits from recent gains in gold which had roughly a $100 trading range from Tuesday’s open at $1990 to yesterday’s high of $2083. Before the upside breakout in gold which occurred on Tuesday, May 2 gold pricing was contained in a narrow trading range between $1980 and $2020.

Technically speaking gold traded through a series of lower highs and strong support at $1980. This created an asymmetrical triangle pattern composed of a descending top and a flat bottom. Typically, this type of asymmetrical triangle occurs during a price correction and once pricing reaches the apex of the triangle market technicians look for a break to lower pricing. In rare instances, this pattern can be found during an uptrend as witnessed this week in gold.

Considering that the major fundamental factors that have moved gold substantially higher are still unresolved and worrisome today’s strong decline in gold prices could present an opportunity to buy the dip. There is still common ground that both Democrats and Republicans can sign off on as we get closer and closer to the date at which the government can no longer meet its obligations. Whether or not there are more midsize regional banks that could become insolvent is unknown. Combined these issues could certainly continue to be highly supportive of gold prices moving them higher.

However, gold enthusiasts got a reprieve today as gold futures dropped $30.80 or 1.5% with the most active June 2023 Comex contract currently fixed at $2024.90.

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Wishing you as always good trading,
Gary S. Wagner