Today's report on February's jobs creation numbers were almost in the excellent category yet unemployment went back up. This is probably a sign of optimism as those who stopped looking for jobs begin to re-enter the race and young people looking for the first time make their statistical presence felt.
This is the first really solidly positive news of the New Year and it sent gold and silver lower, although as of this writing they have come off their lows for the day.
Many people believe that this bit of news is going to accelerate tapering. First, we as precious bulls have actually been doing much better since tapering began for a variety of reasons. Second, this better-than-forecast jobs report won't accelerate anything anymore than all the bad news decelerated tapering.
If there can be such a thing from the Fed, tapering is a timing play. They're trying to peep over the horizon and foretell when inflation will rise and when unemployment will head definitively under 6.5. (Like 6.1%.)
The most recent Beige Book spoke quite extensively about what the hard weather has done to the economy. The word "weather" or weather-related words and expressions can be found 200+ times in the report.
Now, not all softness is due to the weather, but it is probably the primary factor for the slowdown in the previous three months.
Not everyone is on board with the idea that gold will continue to rise on fundamental news. And, naturally, fundamentals can turn on you like a beaten dog.
"Positive economic data is going to lead people to believe that holding safe-haven assets isn't necessary anymore," said Thomas Capalbo, a metals broker with Newedge in New York.
We think his statement needs some serious qualification. It should read "some people." And presumably there are a lot of analysts and investors who feel as if the stock market is a never-ending up escalator. But realists know this is not so.
In fact, historically, the higher equities go, the more volatile trading often becomes. And, as some people find their investments in stocks appreciating, they have a strong psychological inclination to hedge against loss.
The FOMC's next meeting will surely see another round of tapering, but, if the recent past is any indication, this will be good for gold and silver.
On Thursday, William C. Dudley, president of the Federal Reserve Bank of New York, told the Wall Street Journal that the "threshold is pretty high" for a major deviation in the course of reducing its monthly bond purchases. He added that his view of the economy had not been altered by the weak batch of the data recently.
As always, wishing you good trading,