Scorp, The bearish view for gold- fact or fiction?
“A stronger-than-expected U.S. employment report was the latest headwind to hit gold Friday, and as a result, analysts are expecting to see lower prices in the near term. The government reported an increase of 195,000 jobs in June, when expectations were for 155,000 to 166,000. Further, the tallies for the previous two months were revised higher. With the revision, June’s job report showed that the U.S. economy created about 100,000 more jobs than economists expected, said Peter Buchanan, senior economist at CIBC World Markets. As of 10:14 a.m. EDT, August gold was down $40.70 to $1,211.20 an ounce; one minute before the report was released, the contract was trading at $1,241. “There is just no reason to be long gold right now,” said Sterling Smith, futures specialist with Citi Institutional Client Group. Although the jobs report was positive, Smith said he doesn’t think it will be enough to force the Federal Reserve to cut back on its $85 billion monthly bond-purchase program right away. He said he could see the Fed waiting to see at least two more jobs report and then perhaps act in November.”
Interesting though that despite “the release of figures showing America's economy added a better-than-expected 195,000 new jobs in June.”, “The number of people unemployed was 11.8 million, up a slight 17,000 from May. In the private sector, the average work week remained unchanged in June at 34.5 hours”. Despite an unexpectedly strong jobs number, there are actually a few more unemployed in June over May although that is probably explained by “There was also an increase in the number of people looking for work, while the unemployment rate held steady at 7.6 per cent.” On the negative side for the US, all the jobs added were service related (nothing produced and exported to earn income for the country) “The most robust job growth - 75,000 new jobs - was in the leisure and hospitality sector, which has been making a strong comeback over the past 12 months amid a modest economic expansion. In that sector, 5,200 jobs were added in food services and drinking places, the department said. Other leading gains were in professional and business services, up 53,000 jobs, retail trade (37,000), health care (20,000) and financial activities (17,000).
On the bright side for Australia it all places upward pressure on the USD and downward pressure on the AUD helping our exporters, miners (including good old ABM RESOURCES!), farmers and manufacturers (non service industries most of which bring money into the country and/or reduce our reliance on imports). The AUD closed at a new 2.5 year low with support around 93 well and truly broken. Next target would be 80c, then 70c (attached chart). So while it’s easy to see downward pressure from investors selling gold for as long as the US economy appears to be gaining strength and the media reports continue bearishly toward gold, that same gold moves into Chinese and Indian hands and into central bank holdings so is tied up in longer term holdings. That movement can not last forever. “since 2000, we’ve had much more demand... This has come from central bankers becoming net buyers, to a fourfold growth in annual gold coin sales in the U.S. and Canada, to China’s consumption quadrupling, while India’s consumption has grown by 30%. In other words, the fundamentals remain bullish.”
And a not so positive perhaps more realistic article on the US jobs report; People working part time, referred to as “involuntary part-time workers” because their hours had been cut or they were unable to find full-time work, rose by 322,000 to 8.2 million. That reflects a disturbing trend in this recovery that the recent job growth has come in sectors that tend to be low-paying, such as leisure, retail and hospitality, and in temporary work. At 7.6%, the rate of joblessness is a striking improvement from the 10% rate of four years ago, but it is still uncomfortably higher than the average 6% unemployment rate for the 24 years before the recession started. However, those numbers don’t tell the real story of what the government refers to as “labor underutilization.” That measures unemployment at a jaw-dropping unadjusted 14.6%, which includes people jobless for 15 weeks or longer as well as those considered “discouraged” because they can’t find jobs and have given up and those working part-time jobs because that’s all they could find, according to the Bureau of Labor Statistics. Temporary work has accounted for roughly 25% of net employment gains since the recession ended, and is approaching a new record. “Let’s not kid ourselves,” says Gary Burtless, a senior fellow of economic studies at the Brooking Institute, “all these indicators of labor market hardship suggest the job market is slowly recovering…(and) we’re still a long way from full employment. “Of course, none of these indicators tells us the number of full-time or part-time workers who hold jobs in occupations that are far below their occupational and educational qualifications levels,” he adds.
Again "That measures unemployment at a jaw-dropping unadjusted 14.6%, which includes people jobless for 15 weeks or longer as well as those considered “discouraged” because they can’t find jobs and have given up and those working part-time jobs because that’s all they could find, according to the Bureau of Labor Statistics."
So while unemployment rate appears to be improving, the reality is that without the adjustments to how the number is calculated to make it look better, the real rate has moved higher to 14.6%, not lower.
Dodgy.
ABU Price at posting:
2.8¢ Sentiment: Buy Disclosure: Held
(20min delay)