Morning Market Update: April 5

April 5th, 2013 by

Gold and silver jumped this morning in the U.S., as much weaker than expected employment data sparked short covering and bargain hunting in both metals. Gold had been slightly higher overnight despite the absence of China in physical buying in Asia. The dollar gave up some of Thursday’s gains overnight, and dropped in U.S. trading on the release of the jobs report.

March employment gains had initially been expected to be around 200,000 jobs before Thursday’s disappointing ADP private payroll report. Analysts trimmed their estimates to 190,000 or slightly less, but the actual number of 88,000 was far below even the bearish expectations. This news, combined with the highest first-time jobless claims in four months yesterday was enough to send equities down and precious metals up.

The PGMs did not come along for the ride, and palladium actually fell. Palladium is used for catalytic converters in gasoline-powered automobiles, so bad employment numbers cast doubt on U.S. auto sales being robust. The dollar gave up yesterday’s gains after the jobs report hit, and oil was lower for the third day in a row.  The slightly weaker dollar has lent a little bit of support to precious metals.

European stocks were lower as investors took to heart the warning that Thursday’s ADP private payroll numbers had provided.  The Nikkei index broke the 13,000 level in intraday trading for the first time since August 2008, but fell back on afternoon profit taking. It still closed up a very solid 4.7%. Japanese 10-year bonds hit an all-time low yield of 0.315%. This is all from the breathtaking quantitative easing policy announced yesterday by the Bank of Japan.

Stocks in Hong Kong experienced a sell-off started by the sixth death from avian flu in China in recent days. Although Chinese markets are closed Friday for the second day of the Qingming Festival, Chinese airline stocks took a beating in Hong Kong over the news.

Gold may have formed a double bottom now, but we will see whether there is confirmation of this on Monday, when China re-enters the physical market. Although day traders who bought on yesterday’s dip may be happy, remember that precious metals investing is usually a long-term strategy against currency debasement and inflation.

by David Peterson