Less Than Great News Kicks Gold Up

A slightly less-than-cheering October jobs report gave traders pause as to whether they were jumping the gun on anticipating higher interest rates from the Fed. But, in fact, the job report was (or more accurately, will be) much better than raw numbers indicate.

The main thing to look at is the average monthly discrepancy between the first number (the one we received today) and the revised number, due out in a few weeks. This year, the revised numbers have shown an average extra gain of 28,500 per month. So, couple that with today's 214,000 and you find quite robust employment growth. And, what's more, except for aberrations, momentum is building. (A monthly increase of 242,000 jobs represents almost three million jobs per year.

"After we've had such a big selloff, some speculators are covering their shorts after the worse-than-expected non-farm number. I think that's all it is at this point," said Thomas Capalbo, a precious metals trader at Newedge. A shrug of the shoulders? We agree.

The short-sighted reaction to the Labor Department's report also helped sink the dollar, thereby pushing gold up from that end, too.

There were other forces afoot, though. There is a general sense that the dollar has risen too fast, gold has fallen too fast, and oil is in a sloppy retreat that needs to be modulated and re-ordered.

The Dow and S&P were up modestly, while the NASDAQ was down a touch.

Trading in gold was brisk, taking off early in Asia, which saw some life in its physical buying. Momentum gathered in Europe and then the jobs report landed.

Many traders and analysts felt strongly that gold, indeed has fallen too far very quickly and were betting on today's bounce. They were right. We would look for them to bail out as soon as they know the upward momentum is stopped.

As we head into the weekend, we would like to remind subscribers that the technical analysis we offer here should be considered a port in a storm. Fundamental factors are eccentric, move suddenly and can't be relied upon day in, day out. Fundamentals set the table but technicals are the meal.

Wishing you as always, good trading,