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 Gold remains consolidative at the lower end of the recent range,
as the market awaits tomorrow's release of May jobs data. The nonfarm
payrolls report is being viewed by many as a key deciding factor in whether
the Fed hikes rates again this summer.
Expectations for the payrolls number are running around +155k. That's worse
than the April print of +160k, which pretty much convinced everybody that the
Fed would remain on hold until later in the year. The ADP Employment Survey
for May came in at +173k this morning, near expectations of +170k.
Initial jobless claims for last week came in slightly lower than expected,
but once again indications of a weakening manufacturing sector continue to
pile up. NY ISM plunged to 37.2 in May, well below market expectations,
versus 57.0 in April. This is the lowest read since April 2009.
While many will argue that manufacturing losses are being offset by gains in
the services sector, the mounting gloom in the former should give the Fed
pause when they meet later in the month. Given the full-court press since the
release of the April FOMC minutes to shift rate hike expectations, the
central bank will be waling a very thin line between undermining the weak
economy and their own credibility.
The Fed may well be looking for an excuse to not raise rates, in much the
same way that Abe in Japan was looking for — and found — an excuse to not
implement the sales tax hike. Given the decidedly uneven U.S. data, one has
to wonder why the Fed bothered boosting rate hike expectations in the first
place. Will the May jobs report provide them with an excuse to not hike?
We'll find out tomorrow at 8:30 ET.
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