Gold gains after disappointing jobs number

In the Lead: “E Pluribus Unum”

The first trading day of June got off to a bit of a wobbly start in commodities as investors awaited US economic and employment data before making any large-scale bets in the complex. Overnight news from the global economic front was not all that auspicious for speculators to augment their level of betting on the long-side in precious metals.

All of this was taking place even as the US dollar remained locked under the 74.5 level on the trade-weighted index and crude oil still hovered at the $102.50 per barrel mark, apparently unwilling to get going into either direction from that price-point. Most hedge funds lost money in May amid the wacky volatility on display in many a market. Commodity-focused funds took some real hits on the chin as a result of the gyrations in various metals and agriculturals. They will have to pedal that much harder this month. If only the global economy would cooperate, darn it.

There is something of a soft-patch being detected out there in the global economy these days. For example, the hitherto seemingly invincible Aussie economy saw its GDP contract by the most in two decades in the first quarter of this year. The devastating floods in Queensland took their toll on the country’s output pushing the national GDP down by 1.2% while exports fell by nearly 9%.

The fact that China’s manufacturing activity grew at the slowest rate in nine months last month certainly did not help matters for the Land Down Under. China, India, and Japan’s demand constitute more than half of Australia’s exports. All three trading partners showed weak or weaker than anticipated growth during various months of the year-to-date.

China is also still grappling with its pesky inflation bogey. Economists suggest that Premier Wen’s anti-inflation combat may well have received a small dose of “encouragement” from the figures related to the country’s manufacturing slowdown, but that the decline was mild enough to leave room for yet another interest rate hike by the PBOC (its fifth since last October) to take place, perhaps as early as this coming weekend.

India’s economic growth rate also slowed during Q1 of 2011 while inflation continued to present an annoyance even after nine hikes in key interest rates by the RBI. The combination of such trends underway in China and in India has raised the levels of caution among commodity bulls whose on-going profitability in speculating has largely been predicated on levels of “Chindian” growth that were formerly the “norm.”

Over in Europe, the 17-nation euro area showed a fall in its gauge of manufacturing activity in May. While the reading came in at 54.6 (versus 58 in April) and it still indicates “growth” the fact that there is a slowing has raised nervousness levels among investors. Stocks in Frankfurt fell on the news.

As things stood this morning, the ISM figures for the US’ own manufacturing activity levels were also expected to point toward a slowing in economic growth. Median estimates placed the ISM’s numbers at around the 57 level (down from over 60 in April). Most of the slowdown will be chalked up to the ripple-effects of the March Japanese quake and the dip is expected to be transitory and not result in a Fed panic of some type.

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