Yet more supporting factors are shifting into place for the gold bulls, with the latest round of unemployment data issued by the U.S. Labor Department further fuelling fears that a recession could be on the way.
While the data shows that the number of new workers claiming unemployment benefits for the first time has remained, there was a huge red flag in the newest stats. That came in the form of the number of workers making ongoing claims. That segment has increased for the seventh successive week and has now hit its highest point since the middle of April. This has led economists to the conclusion that those laid off are taking longer to find new jobs as the labour market cools.
With jobs harder to come by and workers unable to secure a steady salary, it’s likely that consumer spending will fall as a result. We could also see an increase in credit defaults and a fall in home purchases as finances become tight in households across the country.
Bloomberg Economics says an uptick in continuing claims points to deeper issues. In a briefing note it said, “The recent pickup in continuing claims suggests unemployed workers are increasingly having a harder time finding new jobs. Demand for workers is retreating from unprecedented pandemic levels and the unemployment rate now stands at the highest level in nearly two years.
“Economists expect the labour market to gradually cool going forward, and that is already translating into higher anxiety among workers. With interest rates now at the highest levels in more than two decades, some employers are starting to scale back their hiring plans, while others are cutting positions altogether.”
This data will likely impact on the Federal Reserve’s actions through the end of the year and could mean that no further rate increases take place. Financial journalist Eliza Winger says, “Continued jobless claims climbed higher last week, signalling the increase in the unemployment rate will likely persist. We expect a cautious Federal Reserve to hold policy rates steady through year’s end with the jobless rate on track to overshoot the FOMC’s forecast of 3.8% in the fourth quarter.”
This scenario is nothing but good news for the gold bulls, with recession fears likely to spur a new wave of safe-haven demand and push prices skywards. Don’t wait for next week’s data before making your move. Buy now before gold prices race past £1,636 ($2,000).
