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Gold Rebounds on Payrolls Missby Peter A. Grant
Apr 05, AM 
Gold rallied strongly on Friday, leaving the low end of the range that has dominated for more than a year well protected. The yellow metal was spurred by a growing realization that the era of super-easy monetary policy is far from over. As I pointed out yesterday, ZIRP and other extraordinary central bank accommodations have been significant drivers of the secular bull market in gold. Earlier in the week the Bank of Japan announced an unprecedented new quantitative and qualitative easing regime. The BoJ will basically double the monetary base over the next two-years in an effort to achieve its goal of generating 2% inflation within that time frame. After holding steady on rates, ECB President Mario Draghi took on a decidedly more dovish tenor in his press conference. Draghi expressed concerns about downside risks to growth and pledged that the ECB would remain accommodative as long as was necessary, while closely monitoring the situation. This heightened expectations that an ECB rate hike might be forthcoming sooner rather than later. This morning, the Bureau of Labor Statistics revealed that U.S. nonfarm payrolls grew a weak 88,000 in March, well below expectations of +195,000. While the jobless rate dropped a tick to 7.6%, this was attributed to another drop in the labor force participation rate to 63.3, a level not seen since 1979. Not exactly how you want to see the unemployment rate lowered. Former White House economic adviser Austan Goolsbee, commenting on CNBC said of the print, "This is a punch to the gut. This is not a good number." It's unfortunate that that the rebound in gold comes at the expense of a dimmer outlook for employment. However, gold has suffered of late on intensified talk that a phased withdrawal of Fed accommodations was imminent because the economic, employment, stocks and housing market were all looking better. I remind you all once again about the "green shoots" spring of 2009 and the "recovery summer" in 2010. Fed chairman Bernanke himself was unsuccessful in silencing the "QE's days are limited" crowd, saying quite adamantly last month that the Fed would keep its foot on the monetary gas pedal well into any recovery. This little dose of reality may have succeeded where Bernanke, Yellen and Evans et al failed. However, I don't expect the phased withdrawal advocates to be silent for long. NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here. |
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Friday April 5
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