Precious metals spiked early in New York, even as the dollar soared like a bottlerocket (usually a bad sign for commodities) Wall St. opened solidly lower.
What caused such a topsy-turvy open? The ADP payroll report came in as gaining a whopping 215,000 jobs, against expectations of 170,000 job being added. Combined with better than expected economic reports earlier this week, it put the “Fear of Taper Now” into the markets, strengthening the dollar as traders start taking profits in stocks and parking the money in cash.
Gold and silver, which had briefly dipped below support after a nasty few days of selling off, rebounded and caught some shorts with their shorts down. Gold quickly stair-stepped up $10/oz to the $1,225 level shortly after 8am, while silver shook off volatile sideways trading near the $19 mark to jump 30 cents. 10-year Treasury yields spiked to 2.84%.
The market turned after new home sales for October were reported to have risen at the fastest pace in 33 years after hitting lows in September, though existing home sales dropped further. September’s low numbers may have been people putting off a home purchase until the government shutdown was resolved. Mortgage applications declined for the fifth straight week, intimating that the buyers of all these new homes are REITs and big funds, instead of families.
Precious metals did not follow the dollar back down, maintaining recent gains even as the stock market swung out of the red.
The Hang Seng and Nikkei indices were down from yesterday’s big highs, while Shanghai was up on more pronouncements of yuan and interest rate reforms. Euro stocks were lower again, on news that French and Italian service sectors dropped back into contraction, and growing fears of a tapering of U.S. central bank bond buying will pull money out of European markets.
The zooming dollar put pressure on most major currencies, except the yuan, which showed even more strength.
The big report that everyone is treating as “tapering tea leaves” is the official employment report on Friday. The ADP report is usually used to discern a trend, but many times is overly optimistic. The broader official jobs numbers will be the ones that the Fed will use as a major yardstick on whether to Taper for Christmas.