The US economy added only 194,000 jobs in September, significantly below expectations. While the unemployment rate declined from 5.2% to 4.8%, the Fed still sees the weak payrolls as "decent" enough to begin tapering asset purchases in November. Gold prices jumped briefly but failed to break resistance at $1,780, highlighting gold's inability to benefit from inflation worries or a weak labor market amid the focus on upcoming monetary policy tightening by the Fed.

1. Gold Can’t Rise On Weak Payrolls

2. Points To Be Discussed Today:
• September Nonfarm Payrolls
• Implications For Gold
• Price Of Gold Jumped
• Gold Price In 2021
• Gold’s Inability To Shine

3. September Nonfarm Payrolls
• The US economy added only 194,000 jobs in
September, falling short of expectations, but
the Fed can still taper soon — and gold knows
it.
• Another disappointment from the economy!
The September nonfarm payrolls came
surprisingly weak.

4. September Nonfarm Payrolls - I
• The disappointing numbers followed the
additions of 1,091,000 in July and 366,000 in
August (after an upward revision).
• The most recent job gains were the weakest
since December 2020.
• As the chart in 7th Slide shows, the US labor
market added only 194,000 jobs last month,
much below the expectations (analysts
forecasted about half a million added jobs).

5. The Unemployment Rate Declined
• However, the overall report was generally
more positive than the headline.
• First of all, the unemployment rate
declined from 5.2% to 4.8%, as the chart
shows.
• It’s a positive surprise, as economists
expected a drop to only 5.1%.

6. The Unemployment Rate Declined - I
• In absolute terms, the number of unemployed
people fell by 710,000 - to 7.7 million.
• It’s a considerably lower level compared to the
recessionary peak, but still significantly higher
than before the pandemic (5.7 million and
unemployment rate of 3.5%).

7. Nonfarm Payrolls & Unemployment
Rate

8. Employment Is Higher Than Previously
Reported
• Second, taking revisions into account, the
employment in July and August
combined is 169,000 higher than
previously reported.
• It means that the monthly job growth has
averaged 561,000 so far this year and
about 550,000 over the last three
months.

9. Very Weak Nonfarm Payrolls
• Third, the main reason for the very weak nonfarm
payrolls was a decline in local and state government
education - by 161,000.
• Most back-to-school-hiring typically occurs in
September, but the recruitment last month was lower
than usual, which some analysts attribute to early
retirement of some teachers, mask-wearing mandates
and vaccination requirements.
• Another issue is that the report is based on data that
was collected when the Delta variant of the
coronavirus was reaching its peak, and now the
situation looks better.

10. Implications For Gold
• What does the recent employment report
imply for the Fed’s monetary policy and the
gold market?
• Well, Fed Chair Jerome Powell told reporters
during his press conference in September that
he would like to see a “reasonably good” or
“decent” employment report before deciding
that the Fed’s threshold for reducing its asset
purchasing program has been met.

11. Implications For Gold - I
• So, you know, for me, it wouldn’t take a
knockout, great, super strong employment
report.
• It would take a reasonably good employment
report for me to feel like that test is met.
• And others on the Committee, many on the
Committee feel that the test is already met.

12. Implications For Gold - II
• Others want to see more progress.
• And, you know, we’ll work it out as we go.
• But I would say that, in my own thinking, the
test is all but met.
• So I don’t personally need to see a very strong
employment report, but I’d like it see a decent
employment report.

13. Implications For Gold - III
• Now, the question is whether 194,000 job gains
are decent enough to taper the quantitative
easing.
• Interpreting words of an oracle is never an easy
task. The September payrolls are neither strong
nor a catastrophe.
• However, given the level of expectations and the
fact that job gains were weaker than in August
(commonly considered a great disappointment) I
wouldn’t describe the latest payrolls as “decent”.

14. Significant Decline In The
Unemployment Rate
• However, we have to remember that the
overall report was much better than the
payrolls analyzed in isolation.
• Given the significant decline in the
unemployment rate, the September
employment report can be defended as
“decent”.

15. FOMC Tighten US Monetary Policy
• So, the Fed can still taper in November, or
announce it at least, especially that some
members of the FOMC were ready to tighten
US monetary policy already in September.
• It seems that my line of thinking is in line with
the market’s interpretation of the Fed’s likely
course of action.

16. Price Of Gold Jumped
• The price of gold jumped briefly on 8 Oct
above $1,780, but it could not break the
resistance or hold this position and returned
quickly to its recent comfort zone of $1,750-
1,760.
• The rather shy reaction of the yellow metal
can be seen on the chart below.

17. Gold Prices In 2021

18. Gold’s Inability To Shine
• Gold’s inability to shine in response to the second
weak nonfarm payrolls in a row or to the inflation
worries is quite disappointing.
• Well, Mr. Market decided that the September
employment report wouldn’t restrain the Fed
from tapering.
• The focus on the upcoming tightening cycle
creates downward pressure on gold prices, which
counterweighs worries about the labor market or
inflation.

19. Gold’s Inability To Shine - I
• However, it might be the case that the price of
the yellow metal will bottom somewhere
around the actual start of tapering.
• And without all that pressure around the
tapering announcement, it could be free to
move upward again.

20. Gold Can’t Rise On Weak Payrolls

21. THANKS FOR LISTENING
Gold Can’t Rise On Weak Payrolls