Gold retested lows hit in June and December 2013 overnight in early Asian trading, dropping to the $1185 level before recovering. Short-covering and bargain hunting kept the yellow metal on an upward glide path to break above $1195 at the COMEX open.
Analysts will be keeping a careful eye to see if this is the establishment of a triple low for gold, which may presage a turnabout.
Precious metals were assisted in their recovery this morning by a slightly weaker dollar, which has given up a small portion of Friday’s substantial gains. Arguments have reignited on when Yellen and the Fed will raise rates after the euphoria over the much better than expected non-farm payroll report Friday,
Yesterday in the Markets
Friday’s markets saw a continuation of the trends that persisted throughout last week. Generally speaking, commodities and precious metals recorded losses, while equities ended last weeks bullish run with modest gains.
- Gold – $1,190.70 ⇓ (23.60)/(1.94%)
- Silver – $16.86 ⇓ (00.24)/(1.40%)
- Platinum – $1,220.00 ⇓ (44.00)/(3.48%)
- Palladium – $751.00 ⇓ (14.00)/(1.83%)
- Dow Jones – 17,009.69 ⇑ (208.64)/(1.24%)
- NASDAQ – 4,475.62 ⇑ (45.43)/(1.03%)
- S & P 500 – 1,967.90 ⇑ (21.73)/(1.12%)
- US Dollar Index – 86.639 ⇑ (1.038)/(1.21%)
- 10 Year Bonds – 2.43% ⇓ (.01)
A strong September jobs report, including the non-farm payroll, caused investors to double down on stocks and equities while sagging safe haven demand caused drops in both precious metals as well as treasury bond yields
Economic News Affecting Gold
The US jobs report for September was the best report in many months, bringing unemployment to it’s lowest level since 2008, at just 5.9%. This caused a bullish run in the stock market Friday, and fleeting safe haven demand for Treasury Bills and precious metals. However, the news of the recent economic gains should be taken without some level of skepticism. Specifically, the number of discouraged workers who have given up trying to find employment is still at historically high levels and the labor force participation rate, a key economic indicator for the health of the labor market, is at it’s lowest level since 1978. More importantly, average hourly earnings fell by one cent, settling at $24.53, when economists had predicted that it could increase by as much as 2%. As the holiday season approaches, this could start to become a factor for the retail industry as it gears up for it’s most profitable time of year.
Tech giant Hewlett Packard confirmed plans to split into two separate publicly traded companies; one for it’s server and software operations, and one for it’s computer and printer manufacturing operations. HP also announced they would be cutting more than 5,000 jobs, and using the money saved to invest in additional research and development initiatives. The two combined to send Hewlett Packard shares up 5% on the news.
Geopolitical News Affecting Gold
The Russian rouble hit an all time low against the the US dollar under the pressure of European and US backed sanctions for their continued involvement in the Ukrainian crisis.
Against the dollar, the rouble hit a low of 40.05/1, and a low of 44.60/1 against a currency basket comprised of the dollar and the euro (a key ratio used by the Russian monetary authority to calculate exchange rates). The Russian MA stepped in to aid the hemorrhaging currency by selling off portions of it’s foreign reserves. However it didn’t prevent Russian businessmen, who have been cutoff from international capital markets, from flocking to US dollars to protect themselves from the impending depression that is sure to come should Putin refuse to capitulate in Ukraine.
In Hong Kong, protests over the incursions of the Peoples Republic of China over the cities elections have started to taper down. Being that Hong Kong is home to one of the worlds largest gold markets, this has the potential to help the yellow metal recover it’s losses from last week, should the pretests continue to shrink.
Look for signs of capitulation from the Russian dictator as sanctions continue to squeeze the Russian economy, and bring Russian markets to their knees. Retail sales numbers are set to be released tomorrow, which will be a strong indicator of how promising the upcoming holiday season will be.