Precious Metals: The Battle between Strong Overseas Data and Weak Expectations

The US non-farm payroll data for September was released by the Bureau of Labor Statistics on October 6th. The data showed that there was an increase of 336,000 non-farm jobs in September, significantly surpassing the expected 170,000 jobs and the previous month’s 227,000 jobs. The unemployment rate for September was 3.8%, matching the expected rate of 3.8% and the previous month’s rate.

The service industry accounted for the largest proportion of new non-farm jobs, with 234,000 jobs added. The government sector added 73,000 jobs, while the goods-producing sector added 29,000 jobs.

In the goods-producing sector, the manufacturing industry saw the largest increase in jobs, with 17,000 jobs added, up from 11,000 jobs in August. However, it is worth noting that since mid-September, the United Auto Workers (UAW) has been involved in a large-scale strike, with UAW members accounting for 56% of the total number of workers in the US automotive manufacturing industry. It is expected that the strike will affect the manufacturing sector’s job growth in the October non-farm payroll data.

Within the service industry, the leisure and hospitality sector saw the largest increase in jobs, adding 96,000 jobs. The education and healthcare sector added 70,000 jobs, while the professional and business services sector added 21,000 jobs. The information sector, however, saw a decline in employment, losing 5,000 jobs since May.

On October 4th, around 75,000 employees of Kaiser Permanente, the largest private healthcare organization in the US, went on strike. This is the largest strike in the US healthcare industry in recent years. The strike may have an impact on the October non-farm payroll data for the service industry, as the healthcare industry is a significant driver of job growth.

Over the past two years, the strong non-farm job growth in the US has been driven by an increase in the labor force. However, the COVID-19 pandemic has caused a significant decrease in the labor force, with a decrease of 3.947 million people by the end of 2020. As the impact of the pandemic diminishes and government support payments decrease, some of these individuals are entering the labor market, fueling the continued strength of the US labor market.

Following the release of the better-than-expected non-farm payroll data, there was a significant short-term drop in the price of 10-year US Treasury bonds, indicating a decrease in expectations of further tightening of monetary policy. At the same time, the US dollar index experienced a rapid increase followed by a decline. We believe that the market pricing on that day reflected the expectation of a weakening labor market in the backdrop of strikes in the US. The expectation of further tightening of monetary policy as one of the goals of monetary policy, is weakening.

The September US PPI data exceeded expectations due to the impact of energy prices. The September PPI YoY was 2.2%, higher than the expected 1.6% and the previous month’s 2%. The September core PPI YoY was 2.7%, higher than the expected 2.3% and the previous month’s 2.5%. The September PPI MoM was 0.5%, higher than the expected 0.3% and lower than the previous month’s 0.7%. The September core PPI MoM was 0.3%, higher than the expected 0.2% and the previous month’s 0.2%.

The core PPI YoY continued to decline, while the overall PPI YoY rebounded for the sixth consecutive month since June. In terms of sub-items, the energy sub-item in final goods demand saw a MoM value of 3.3% despite a slowdown from August’s 10.3%. In the intermediate goods sub-item, the MoM inflation value for unprocessed energy raw materials was 7.5