With U.S. companies adding 297,000 jobs last month, it looks like the American economy is ready to join the global party. This is great for the dollar and not good for gold.
The monthly ADP employer services survey has become a closely watched indicator because it gives traders an advance sense of what Friday’s more comprehensive numbers from the Department of Labor are going to reveal about the job market.
Today’s number is truly stunning, with the service sector in particular generating more new jobs than ever.
The dollar — as embodied by the DXY index — is surging on the news.
Naturally, a strong dollar saps commodities of some of their immediate upside, but gold in particular is not going to fare well here. Economic fear has helped support the gold market and if the main pivot of U.S. fear — the job market — is improving, the bid to gold may evaporate further.
Gold is still likely to retreat to $1,250, at which point it will be on the 200-day support line and you can buy it without much fear of further downside. But by that point, the SPDR Gold Shares ETF (NYSE:GLD) should be down another 10% or so.
The question is whether the U.S. economic “porridge” is getting too hot, too fast for the Goldilocks in the market and in the Fed to handle.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.