Today’s un-employment rate challenges levels not seen since the rate the Great Depression

This morning the U.S. Labor Department released its monthly nonfarm payroll jobs report. As expected, there was no light at the end of the tunnel, as the numbers of American workers who flocked to the unemployment office did so in force.

The report indicated that there were at least an additional 20 million jobs lost due to the COVID-19 pandemic in April. The U.S. unemployment rate surged to 14.7%, however the unofficial estimate of unemployed Americans is believed to be as high as 19.7%.

While the Great Depression of the 1930’s resulted in the loss of approximately 24.9% of the workforce, this pandemic has resulted in an unprecedented level of individuals that have become unemployed. Although these numbers are less than those of the Great Depression, America has now faced a crisis of the magnitude since 1933. The hard fact is that they could, and quickly approach that unfathomable rate.

Some economists believe that the real jobless rate is closer to 20%. The discrepancy lies in the fact that the Bureau of Labor Statistics believes that not all workers correctly respond to their status of employment. One example is furloughed workers.

Considering that the great recession of 2008 resulted in an unemployment rate just under 11%, the numbers achieved during this pandemic are just a mere drop in the bucket compared to the devastation that this current pandemic caused. We are on the on the precipice of economic doom not witnessed since the 1930’s.

There is however one extremely powerful key distinction from resolving the Great Depression when compared to the pandemic crisis today. President Franklin D. Roosevelt enacted the gold act of 1933 which resulted in the gold confiscation act. Which made it illegal for American citizens to buy or own gold coins or paper gold certificates. Although this law provided financial relief to lessen the harm caused in this emergency, this is truly a once and done act and could never be repeated again. These newly acquired funds allowed the United States to recapitalize the banks of the Federal Reserve system, and put American’s back to work. These newly employed workers rebuilt our infrastructure and built road, bridges and the Hoover Dam.

So why did gold trade lower today?

Given such dismal and quite frankly frightening news, both spot and futures gold sold off sharply. Many traders pondered a simple question, if this scenario is not supportive of a safe haven asset such as gold, then what scenario would. The primary explanation for today’s sharp selloff was that although the numbers were quite frankly bleak, the numbers did come in just below economic estimates. But not by much. The forecast for the unemployment rate numbers were 22 million individuals, and the actual numbers reported today was 20.2 million individuals became unemployed in April. The other estimate was for the unemployment rate which economists believed would come in between 15% and 16%. The actual number that was reported was 14.7%.

The quandary that many analysts including myself are facing is that although the estimates were above the actual numbers, the numbers still indicated that this pandemic continues to wreak havoc on the global economy. One Thing is apparent; by no means seeing any improvement.

As of 6:02 PM Eastern standard Time gold futures basis the most active June contract is currently trading off by $21 and fixed at $1704 80. It traded to a low today of $1703.10 and a high of $1735.50. The strong selloff in both gold and silver today I believe were extremely unwarranted, and not based upon the reality of the pandemic. Add to that that there is a decreasing supply of the precious metals.

Wishing you as always good trading and good health,