Gold had plenty of upside momentum last week, before the jobs number was released Friday while markets were closed.

It’s falling today based on that jobs number, but just a cursory look shows the market is over-reacting.

April 10, 2023

Dear Fellow Investor,

Last week I wrote that gold was showing tremendous upside momentum...would soon take out $2,000...and this move would likely take it past the previous record high of $2,063.

Forgotten was my usual cautionary note that it typically takes gold a few tries to stay above these “big number” levels.

And so, if for no other reason than to re-instill some humility into my market predictions, gold has fallen back below $2,000 today.

The selling, which as you see below came immediately upon the opening bell in New York, is in reaction to last Friday’s jobs number.

Nonfarm payrolls for March came in at 236,000 jobs created, which was very close to expectations. However, the headline unemployment rate fell to 3.5%, lower than the consensus expectation at 3.6%, due to a rise in the participation rate.

Because most markets were closed on the Good Friday holiday, the real reaction to the number came this morning.

As you can see, gold today has dropped over $20 as I write, or about 1%, in reaction to this seemingly strong jobs number.

However, a brief look below the hood shows that the report wasn’t as positive as one might think.

The biggest issue is that March’s jobs survey came the week that the Silicon Valley Bank failure erupted and therefore doesn’t reflect the resulting tremors throughout the financial system.

In particular, credit has tightened considerably since then, acting as the precise brake on the economy that Fed officials have been working to achieve.

Gold and other assets are falling today based on the belief that this jobs number will prompt the Fed to keep hiking, at least by a quarter point at their May meeting.

In reality, the rest of the economic data are pointing toward a significant slowdown...and providing more reasons for the Fed to pause.

The next big, all-important data point will come Wednesday with the CPI report, so I’m not expecting the volatility to go away.

But that volatility works in both directions, and the inflation report could just as easily send metals prices soaring.

We’ll see soon enough. Regardless, we need to keep focusing on the bigger picture factors that argue for a much higher gold price.

And that is a Fed that will be forced to stop its rate hikes...even as inflation remains not only high, but pressured higher.

This factor will not drive gold through its previous high, but far above it over the months ahead.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference