Official job reporting will be released in just two days, but some preliminary, non-farming private sector data was released today, March 8, 2017, and they are in line with market expectations. According to the ADP Research Institute, the February private sector job market added around 298,000 jobs. This increase is significant, the largest in nearly three years.
ADP Report — Implications for Gold and Gold Futures
The ADP report is ahead of the announcement from the U.S. Department of Labor, which is coming on Friday, March 10, 2017. However, many analysts see the ADP report as further support for the official government labor report and expect the Friday announcement to reflect today’s findings.
The labor report is an important economic indicator. It reflects the health of the economy and will help the Fed determine if its previous stance for quantitative easing will need to be reevaluated. With more jobs and greater household income, low interest rates could spell long-term disaster. By raising the interest rates, the Fed can leverage economic activity to stabilize the economy and keep control over inflation.
Federal Reserve Decisions — What Is Coming?
The Fed is expected to make an announcement next week regarding interest rates changes. In previous weeks, several influential Fed presidents expressed that interest rates will need to change, but the timing would depend on key economic data, like labor reports.
Earlier in the year, the Fed Chairman, Janet Yellen, remarked that the Fed will likely have three interest rate hikes this year. With the first one now expected to come next week, the other two could follow rather quickly depending on the continued strength of the U.S. economy.
It is still unclear exactly how high interest rates will go. As the rates go up, online gold investors will find other investments more attractive in order to reap the possible yield. The classic relationship between interest rate increases, dollar strengthening and gold devaluation is likely to occur in the coming weeks.
Online Gold Investors — What’s Next?
Keep a close eye on Friday’s jobs announcement. It will provide excellent insight into next week’s Fed announcement. Keep in mind that trade and other policies from the White House have remained vague so far this year, but could play a key role in Q3. For now, the key drivers remain interest rates and the relative strengthening of the gold-denominated currency, the dollar.
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