Same News, Different Reaction
This time, the unemployment rate actually ticked up and gold plunged as analysts said that the drop was due to the increased possibility the Fed will taper QE3 or raise interest rates. Additionally, April's employment rate was revised down. Huh?
Inflation is essentially flat as can be, growth is slowing and unemployment is on the way up, not down. Our only answer is that economic ideologues have convinced themselves that the Fed actions have gone on so long the central bank absolutely, positively must be about to halt them.
Absurdity of the most annoying sort.
"Today's data is telling people that the economy is improving, and that worries gold investors that the Fed may talk about tapering the stimulus," Tom Power, a senior commodity broker at R.J. O'Brien & Associates in Chicago, said in an interview. "Some worry that the stimulus may end later this year." Really? The economy is sputtering.
Mr. Irrationality himself, Alan Greenspan, former Fed chairman, said on CNBC today that the central bank needs to sat cutting back on its high-flying asset purchases and move toward stopping them altogether. So, let's this straight, the man who piled up the dry straw in the barn and left before the match was struck is saying the Great Recession is over? Give him back his medication.
What is even worse is that the incompetent analysts, lead by Mr. Irrationality, have not noted that, of the 175K jobs reported today for May, 55% were of the minimum wage variety. If that's recovery, what does a stalled economy look like? The largest growth area? Hospitality - hotels, restaurants and tour guides. Average wages? Around $13.50 per hour.
As Bloomberg reported:
"The composition of the employment gain caused hourly earnings for all employees to stagnate at $23.89 on average last month, up a cent from April. They rose 2 percent over the past 12 months, compared with year-to-year increases averaging 3.5 percent in the 10 months leading up to the recession that began in December 2007."
While it is not the only component of the inflation gauge, systemic wage structure is the most important one in an economy where consumer spending accounts for 70% of the economy.
How on earth will we have growth or inflation when wages grow by only 2%? What the pseudo-economists need is 2 years in a non-theoretical world, where real earning and spending take place.
So what's the answer?
A more rational approach might at least speculate that investors sold gold to reinvest in equities. Or to cover losses (short covering) from last week's stocks sell off. Another rational approach might allow that we are in much more volatile times than the Fed, the government and business leaders are willing to admit.
Gold could just as easily zoom on Monday. These are tough times for traders of any sort.
As always, wishing you good trading,
Gary S. Wagner - Executive Producer
After witnessing higher prices in gold through the beginning of the week today’s brutal selloff of 2.3% equates to .07 percent loss on the week. Today’s jobs report for May came in better than expected sparking a rally in the equities markets and dramatic selloff in the precious metals markets.
Today’s dramatic selloff in gold places its price point closer and closer to 1335 per ounce. As you know it is that price point that I believe is our line in the sand. Should gold begin to trade at or below 1335 it would lend credible evidence on a technical basis that gold is and has been in a bear market rather than a tremendously deep correction found within a bull market. Is my current belief that gold will probably be range bound throughout the next week. And I also believe that it is essential that gold hold above 1335 per ounce if we are to see some sort of rebound or price support in the market.
Although it might be hard to believe I am more pessimistic on a technical basis on silver prices and today’s 4% decline confirms my concern that we might see silver fall below $20 per ounce.
Long gold @ 1400 out @ 1380 -$20
From the week of 05.31. 2013