Today marked yet another Friday on which the release of the Labor Department’s US jobs’ scene statistics became the principal focus for practically every market participant out there. Over the course of the past couple of years, several such Friday events turned into pivotal, market sentiment-shaping ones that set the course for trading patterns of various longevities.
This morning’s consensus anticipation was largely of a downbeat nature as traders took note of the rush by economists this week to revise their computations of US jobs growth towards lower levels. The midweek negative surprise in the ADP private payrolls figures coupled with the weak showing in the ISM’s US manufacturing activity assessment had prepped the markets for what was to come at 8:30 New York time this morning.
Thus, it was not as important that gold opened some $4 lower and that silver lost 65 cents at 8:20 New York time as what started to take place ten minutes after the final trading day of this shortened market week got underway. The US Labor Department noted that US unemployment touched its highest level since December of last year, ticking up by 0.10% to the 9.1% mark.
The US payroll figures for March and for April were revised downward by 39,000 positions while May’s jobs growth slowed to only 54,000 positions. An immediate reaction to the weak numbers was noted in Dow futures, which fell by more than 125 points as a result of the news. The US dollar also gave up some ground on the trade-weighted index, slipping 0.11 to the 74.21 level. Crude oil promptly lost 165 cents per barrel to ease to 15 cents under the double-nine level.
Gold prices turned higher following the jobs report and traded as high as $1,535 the ounce, while silver narrowed its earlier losses to only 44 cents and was quoted at $35.91 per ounce. Platinum and palladium did not show too much movement in the wake of the data and traded near unchanged-to-slightly-higher levels at $1,815 and at $771.00 per ounce respectively.
Rhodium dropped $25 to the $2,250.00 mark this morning. The US Treasury Department reported that it completed the sale of its last remaining stake in Chrysler. Say “Ciao!” to Chrysler as it is now FIAT-owned. Evidently, parts of the precious and industrial metals took their initial price-trend cue in the aftermath of the jobs data not from the evidently contracting US economy, but from the second wave of perceptions manifest this week that such numbers will “force” the Fed’s hand and that some kind of QE will now need to be baked into the cake for the second half of the year.
Whether such bets prove to be correct remains to yet be seen, that is for sure. Counting on further Fed largesse just because of the reverberations of the Japanese quake and the emergent global soft-patch also dented US jobs figures may prove to be very short-lived and perhaps less than successful, but still full of volatility and counterintuitive moves, nevertheless (see metals prices circa…30 minutes and then 50 minutes after the Labor Department announcement)…
In any case, this morning was also all about assorted warnings. A warning by Dennis Gartman that his sale of half of his gold position is perhaps one step ahead of a potential decline in gold to under the $1,500 level, a warning by the China Banking and Regulatory Commission to the nation’s banks that they need to warn investors who are hot-to-trot in the silver market, a warning by the S&P about commodity market bubbles, and a warning sign seen in George Soros’ recent exit from gold.
In a rare (for it) announcement, the Standard & Poor’s Rating Services said that due to China’s too-large-to-ignore “participation” in the commodities’ market has engendered the likelihood of an unsustainable bubble. The S&P thus feels that any significant contraction in that country’s economy might well result in pain and suffering in the commodities niche. As they say; “You’ve been warned.”
One of the possible factors motivating Mr. Gartman to lighten up on his position in the yellow metal may have been rumor-based, but…as he says: “there are rumors and there are rumors of rumors about IMF sales, or sales on the part of legacy central banks in Europe, or sales from the European Central Bank, the proceeds of which can be used to prop or bail out Greece and the others,” Gartman wrote. “Although these are merely rumors, where this is rumored smoke there can be actual fire.”
Perhaps the bleakest warning of them all came not from the world of money this morning, but from the world itself; in this case, from China’s environment. In a devastating report on the levels of pollution that the country’s hitherto furious pace of growth has engendered, one senior Chinese official noted that more than half of that country’s urban centres are experiencing acid rains and that one-sixth of its river waters are unfit for any purpose.
China’s voracious appetite for lead, for example (it is the top consumer of that metal globally) has resulted in a mushrooming of lead-poisoning cases, especially as seen in children. The Chinese official, Mr. Li cautioned that “these heavy metal pollution incidents not only seriously threaten people's health, they affect social stability, and it ought to be said this is a rather severe issue." As has often been questioned in these columns: “What is the real price of certain metals?” Evidently, one that very few have the courage to talk about…
There was, of course, other news this morning as well. Over in the Old World, the basic (second) rescue package for Greece was all but gift-wrapped by the EU and the IMF. With 50:50 odds that Greece will possibly default on its debt, the time available to the EU do try to do something along such lines turned into days and hours, as opposed to weeks or months.
Very likely, the spectre of a large-scale sell-off in the euro in the wake of a belly-up Greek event was on the minds of those who pedaled hard overnight to cobble together not only a fresh Greek austerity package (how much more will people take?) but the new lifeline plan as well. Greece’s credit rating is now at the same level as that of…Cuba’s.
Closing out this week’s roundup and analysis, we have the well-worn argument of the pros and cons of a gold standard. Regardless of where you stand on the issue, why not consider implementing your own, personal “gold standard” by earmarking a prudent 10% of your basket of assets for that which is NOT an investment but, rather, “life insurance” for the rest of your portfolio? Steve Forbes, after all, agrees with the “non-investment” definition of gold. Might you?
If you want to know more about any of the above and much more, why not take the time this weekend to stop by and attend the highly valuable Cambridge House Resource Investment Conference in Vancouver? An expert team of Kitconians will be on hand to meet and greet you. This writer (no surprise) will present on the fundamentals-based landscape in gold, silver, platinum, palladium, and rhodium. Fundamentals, contrary to certain public assertions, do really matter, still.
Have a nice weekend,
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America