November 11, 2013 - Daily Market Analysis with Tom Williams

Join Tom as lays out his input on the latest developments of the U.S. economy


Gold Prices Fall on Positive US Jobs Numbers

It was reported on 11 November 2013 that the precious metal has faced a new set of hurdles as it fell to a near three week low in trading. The drop in value on gold comes as the recent Non-Farm Payrolls report shocked many economists by showing remarkable growth in the job market, with an estimated 204k jobs created during the month of October 2013.

Analysts remind readers that earlier reports relating to the month of September 2013 had exhibited a significant reduction in the number of jobs, with only 120k positions added to the economy, which had previously been steadily rising. It should be noted though however, that while an impressive number of jobs were created during October, the overall unemployment rate rose to 7.3%, up 0.1%.

Analysts note that the sudden spike in the jobs markets will likely have a number of effects. First, as employment rises, it will help to improve both the value of the US dollar in trading and consumer confidence which in turn can help lead to greater growth across the economy. Secondly, expanded job growth has been a key metric for the Federal Reserve’s FOMC, the key monetary policy making body that controls the central bank’s stimulus activities. As the job figures show signs of progress, many investors believe that the Fed may be more inclined to move up the timetable for reducing their stimulus activities, which currently stands and some $85 billion. Traders anticipating cuts to the quantitative easing measures are likely attempting to take advantage of a rise in the dollar as a movement away from the cuts will make the dollar more attractive in trading on the market. In turn, as the dollar becomes more desirable, investors are turning away from haven assets like gold, which they often run to when core assets such as the dollar appear to be weak.

With the approach of the Christmas season, analysts expect to see increased employment through the month of November and December, which should help to increase the value of the dollar and depres the price of gold for the short to medium term.

British CPI Report to Come Out Tomorrow

The report detailing the Consumer Price Index for the United Kingdom is set to be released tomorrow, 12 November 2013. The report will cover changes to the CPI during the month of October 2013. At this time, many experts have expressed the opinion that there may be a slight decrease in the overall report in comparison with the previous month.

Readers are reminded that the CPI report can help to provide an insight into the current economic conditions of a country, and help to predict the direction that the market there will move.

Analysts assess that the UK is continuing its movement towards growth and away from the recession by expanding its economy.

It would not appear at this time that the release of this report will have any significant impact on the value of sterling in the market. That said, should the predictions prove to be accurate, this reports should be taken as yet another positive sign for the UK.

Reports of Slowed Growth Expected Out of Eurozone

Still reeling from last week’s announcement by the European Central Bank’s that they were going to cut interest rates from their previous constant, many experts have expressed concerns that a slew of upcoming economic health reports will show slowed growth across the Eurozone.

While the numbers are yet to come in during the lead up to the issuing of GDP reports from the various member states in the economic union, economists have already begun to back away from previous forecasts for growth. Among those countries whose growth is expected to slow down are the powerhouses of Germany and France, the later which was recently downgraded by Standard and Poor’s to a AA rating after the firm expressed their doubts in the current government’s ability to spur growth.

Despite the expectations of slowed growth, there do appear to be some positive signs emerging. Weaker countries including Spain and Portugal which had faced destructive recessions are reported to have emerged from their low points and are returning to a more normal state. It should be noted that these countries and others have been dependent on some of the wealthier nations such as Germany and France to stay economically viable during their tumultuous period.

Analysts believe that should the upcoming GDP reports prove to show significant signs of slowing down, it will likely affect the value of the euro in its trading against rival currencies. As such, traders are advised to watch for volatility in the market over the coming weeks.