The Price of Gold Increases After Strong Payroll Data

The latest employment report shows that the U.S. economy added more than 530,000 jobs last month, which was higher than the 450,000 jobs analysts had predicted. This is a welcome change from the August employment report, which showed that only 366,000 jobs were added to the economy. The rate of unemployment also dropped in the same month, declining to 4.6% from 4.8%. This increase in jobs, coupled with the drop in the rate of unemployment, prompted an increase in the price of gold futures, which began to sell for $1,820.

Some analysts find the metal’s behavior surprising, as it typically reacts negatively to strong economic data. Up until recently, the precious metal preferred weak employment reports, as those types of numbers increased the chances of a dovish Federal Reserve on monetary policy.

While there are analysts who believe that something has shifted in the market, others assert that nothing has changed. Those in the latter group explain that this recent employment report isn’t, in fact, strong because the rate of labor force participation remained almost stagnant in October. This stagnation has been observed since June of last year, with the participation rate ranging between 61.4%—61.7%.

This, the analysts explain, indicates a lack of full employment, and they use this as the basis of an argument for why the Federal Reserve hasn’t changed interest rates in quite some time. It should be noted that full employment means that every individual who would like to work is working; however, not all individuals are working.

The analysts in the former group hypothesize that investors are primarily focused on inflation at the moment, as the employment report demonstrated that the average earnings in an hour for workers grew by almost 5% over the last year. This increase raises concerns about the general price pressure and wage inflation in the U.S. economy.

The analysts believe this high inflation is what is creating an environment for gold to thrive in, as the metal’s price is known to increase with the value of inflation. Despite this, they note that if inflation remains high, the U.S. central bank may have to increase interest rates in 2022, adding that gold hasn’t proven that it can remain above $1,800, despite the recent hike.

Increasing interest rates would impact gold severely, as real interest rates are negatively correlated with gold price. This means that higher rates would make the carrying costs of gold higher, which would lead to a reduction in its price as more investors sold the metal.

Regardless of the way in which the price of gold fluctuates, established precious minerals companies such as StraightUp Resources Inc. (CSE: ST) (OTCQB: STUPF) will always find a way to ride out whatever storms come, and even thrive despite sector shocks.

NOTE TO INVESTORS: The latest news and updates relating to StraightUp Resources Inc. (CSE: ST) (OTCQB: STUPF) are available in the company’s newsroom at https://ibn.fm/STUPF

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