Gold weakens following BLS release

2012-NOV-05

Gold and silver endured a tough day on Friday, following the release of better-than-expected US economic data. December Comex gold lost 2.4% ($40.30), settling at $1,675.20 per troy ounce – the first time that gold has settled below $1,700 since the Federal Reserve’s “QE to infinity” announcement on September 13. Though the headline unemployment rate moved up slightly from 7.8% to 7.9%, payroll growth came in at 171,000 – well above consensus expectations of 125,000 gains.

ShadowStats’ John Williams describes these numbers as “not credible”, and “artifacts[sic] of a broken reporting system and/or direct manipulation.” He argues that consistent seasonal adjustments would have produced October jobs gains of just 117,000. On the other hand, over at EconomicPolicyJournal, Robert Wenzel sees these numbers as further signs that “Bernanke’s money printing is clearly hitting the system”, and that the US economy is heading for a “manipulated boom (or mini boom)”. (NB: Alasdair Macleod’s interview with Wenzel is available at this link.) Both men raise points worth considering.

The US election is front and centre of market attention, with equities and commodities on hold ahead of tomorrow’s vote. The FTSE All-World share index is down around 0.3% this morning, while copper and crude oil have also sold off. More uncertainty about whether or not Athens will receive its next load of bailout cash is also hobbling the euro, which has fallen below $1.28. As go the euro and growth assets, so go precious metals.

In the short-term an Obama victory on Tuesday could lead to a sell-off on Wall Street and a weakening dollar – Romney supposedly being Wall Street’s favoured candidate. A Romney victory meanwhile will come with plenty of cheap talk about “renewal” of the US economy and the virtues of his deficit cutting agenda, as well as the prospect of a Bernankeless Fed and – so the argument goes – a stronger dollar. So it’s likely that, short-term at least, gold and silver will come under more pressure in the event of a Romney win.

Longer-term of course, government budget problems (federal, state and local) remain as intractable as ever. Alas, the illusion that “if we just vote in our man, all we be well again” continues to transfix too many people across too many developed democracies.