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US Job Report Lifted the Dollar while Gold Lost Its Luster

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Sector performances

The following graph presents the performances of the component sectors of the SPDR S&P 500 ETF (SPY) as of January 8.

According to the Baker Hughes report, the US rig count for the week ended January 8 fell by 34 to 664 rigs. However, the impact didn’t reflect in oil prices. US crude dropped 11 cents to settle at $33.16 per barrel while Brent crude fell 20 cents and closed at $33.55 per barrel. Concerns about slow growth in China pushed oil prices lower. As a result, the energy sector struggled to recover on Friday, January 8. As the US dollar became more valuable than other major currencies, oil became expensive, especially for China. China’s currency was recently devaluated, making oil expensive for the country.

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Economic front: US jobs report

According to the US Bureau of Labor Statistics, the labor markets came out stronger than estimated for December 2015. Both non-farm payrolls and private payrolls exceeded the higher ends of the consensus estimated ranges. The unemployment rate remained unchanged at 5.0%. The prior month’s readings were also revised to higher levels. As per the report, nonfarm payrolls came in at 292,000 and private payrolls arrived at 275,000 for December 2015. The participation rate improved from 62.5% to 62.6% during the period.

Gold lacked luster

Given such a strong labor market report, investors are anticipating a raise in the federal funds rate. And the US dollar already displayed strength on the day. The rising US dollar made the dollar-denominated commodity gold very expensive. So the safe haven’s value fell on January 8. On the other hand, the anticipation of a further rate increase resulted in investors preferring Treasury bonds over gold. So the gold miners’ ETF, the VanEck Vectors Gold Miners ETF (GDX), fell 2.4% on the day. Its top holdings—namely, Newmont Mining Corporation (NEM), Barrick Gold Corporation (ABX), Goldcorp (GG), and Royal Gold (RGLD)—fell 4.5%, 3.8%, 1.8%, and 3.0%, respectively, on January 8.

Let’s take a look at the performances of the other sectors in the next part of this series.

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