Precious metals had new life breathed into their recent bull run when the U.S. Commerce Department released the latest non-farm payroll report this morning. Payrolls for August rose only 169,000, compared to an expected 180,000. This big miss was exacerbated by the further news that the non-farm payroll numbers for June and July had been revised downwards a whopping 74,000 jobs total. This means that the last three months of payroll reports have been sharply lower than estimates.
The unemployment rate dropped from 7.4% to 7.3%, but this was because of a drop in the labor participation rate; i.e. people giving up ever finding a job.
The sudden dimming of a rosy economic picture caught many traders on the wrong foot. The dollar was hammered, while gold immediately shot up almost 2% after having hit a two-week low overnight. Treasuries also got a big boost, with the yield for the 10-year note dropping from 2.98% to 2.89%.
While some analysts think that the depressing jobs report and revisions of past numbers will not deter the Fed from tapering off its $85 billion a month in bond purchases this month, that action seems far less certain than it did yesterday.
News that Russian President Vladimir Putin at the G20 summit last night raised the possibility of Russian intervention should the U.S. bomb Syria caused European markets to give up solid gains and close at a loss. This news may also have contributed to renewed interest in gold as a safe haven, with the market using the U.S. jobs report as an excuse to break higher. News this morning that the U.S. State Department has issued embassy and travel warnings for Turkey and Lebanon, due to concerns of terrorist retaliation over an American strike in Syria has not exactly calmed the market.
In Asia, stock markets barely edged into the green to end the week on a high note. Also from Asia is the news that Chinese gold imports from Hong Kong for July was the second-highest on record, totaling 129 tonnes. June imports were 112 tonnes. Gold exports were 16 tonnes, for net gold imports of 113 tonnes. This is more than double the 46 tonnes imported in July 2012.
The Indian rupee rallied against the dollar overnight for the second session, gaining 2.8% in the last two days. Some analysts think the worst may be over for the rupee, which garnered worldwide headlines over its recent plunge. This is also good news for Indian gold buyers, assuming they can find anything to buy, as the devaluation of the rupee was causing domestic gold prices to skyrocket.
Speaking of gold supply, mining unions in South Africa are coming to individual wage agreements with gold mining companies, which is winding down strikes that was causing the South African economy $35 million a day in losses.
Oil supply is going to be more restricted in the near future, as Iraq announces major repair work on its vital southern ports will last through September. Iraqi oil exports are expected to drop by 500,000 barrels. West Texas Intermediate crude was trading at $100/bbl this morning, with Brent crude just shy of $116/bbl.
Syria is likely to be on the front page next week, as the U.S. Congress debates whether to allow President Obama to bomb Syria, and the parliaments of allies refuse to authorize their nations to participate. Russia, Iran, and now China have warned the U.S. against unilateral attacks against Syria without incontrovertible proof that the Syrian government was behind a recent poison gas attack near Damascus.