Gold rebounded modestly after dropping on Friday in reaction to the better than expected February jobs report. The NFP beat is widely expected to keep the Fed on the taper path. Offsetting expectations of continued tapering are heightened tensions in Ukraine and signs of global economic weakness.
February nonfarm payrolls came in at +175k on Friday, beating expectations of +145k and whispers of a much lower number. While the unemployment rate ticked higher to 6.7%, the data was seen as good enough to warrant an additional taper of $10 bln at the March FOMC meeting.
While the unwind of trades premised on expectations that the Fed might pause the taper weighed on gold, rising tensions in Ukraine helped to underpin the yellow metal. Russian troops moved over the weekend to solidify their control over the Crimea in advance of a scheduled referendum that could result in Crimea seceding from Ukraine and joining the Russian Federation.
Concerns about a Chinese slowdown also rose overnight when the PRC reported a surprise trade deficit in February. China exports plunged 18.1% y/y in February, while imports jumped 10.1% y/y. This resulting in a trade deficit of US$22.99 bln, versus expectations of a US$14.0 bln surplus. It was the first monthly deficit in nearly a year.
Meanwhile, Japan’s Q4 GDP was revised lower to +0.2% q/q, from +0.3% previously. This left annual growth at a disappointing +0.7% pace, down from +1.0% previously, despite Herculean efforts on the part of the Japanese government and BoJ to reinvigorate the economy.
Despite Friday’s retreat, gold notched its fifth consecutive higher weekly close (ten of the last eleven). The yellow metal rose 0.88% last week and is up more than 11% since the first of the year.