Data in Driver’s Seat as Gold Continues Tumble

New weekly unemployment claims came in lower than analysts had forecast, generating more sentiment that says interest rates will be rising as soon as politically expedient.

That is not a bad thing, since, while we are economic animals, we are certainly also political ones. And the two do go together. We already have a volatile political season upon us. No sense in adding the wildcard of a rate hike at the November meeting.

Before we elaborate below: Gold fell more than $11; the U.S. 10-year bond yield inched toward 1.80%; U.S. equities were slightly off to unchanged; oil rose again and will test its last highs soon, and the U.S. dollar continues to gather strength against the usual basket of currencies.

The rise of the dollar today naturally contributed to falling gold and silver prices. Gold IS off XXX while silver is getting whacked, plunging more than 2.50%.

Let’s turn back to the data.

Tomorrow morning, we will see the release of September employment figures, which could very well add weight to the case for an interest rate hike. Today, it was shown that initial weekly jobless claims fell to 249,000, below the expected 257,000.

This may be the tightening of the labor supply as we now know it.

"The bottom line remains the same bottom line for a while now. At this point of the economic cycle it is tougher and tougher to find good, qualified employees and thus employers are holding on tight to the ones they currently have. We've also seen that this behavior is not inconsistent with the slowing pace of job hiring's," said Peter Boockvar, chief market analyst at The Lindsey Group.

The British pound continues to plummet, losing another percent today. Some in Britain – those who back Brexit – claim this is good for the United Kingdom.

Normally, we’d say that a manufacturing power finds solace in lower currency valuation. A cheaper pound, for instance, theoretically makes British goods cheaper abroad.

However, as we see in countries where economies are shaky, this is not always a terrific thing. (Think Mexico.) Weak currencies also make imports rise, which in the modern world can force domestic prices to rise, thus generating inflation. It can also lead to capital flight for complex reasons, not the least of which is low rates of return in relation to other similar types of nations.

The 10-year British gilt bond had been recovering and seemed headed back to yield parity with the U.S. 10, but it has fallen again, leaving it at about half the percentage yield of the U.S. benchmark bond. (0.815Brit versus 1.741%US) So, where would you want your money to go to grow? (There are many other complexities to this dynamic and we don’t pretend to cover them all in such a small space.)

U.S. crude settled at a four-month high – again. We are nearing the moment of truth, however. As the Clash sang so famously, (so famously that now it’s part of a hotel chain’s campaign): Should I stay or should I go?

Oil has a moment of reckoning coming soon that will determine its price for the next three to six months.

Wishing you as always, good trading,