Gold snapped back from an early sell-off to regain the $1700 level. The yellow metal initially fell to a new 4-week low at 1683.60 after better than expected headline data in the November nonfarm payrolls report tempered expectations of further Fed accommodations. Nonfarm payrolls rose a better than expected 146k and the unemployment rate dropped to 7.7%.
However, after closer examination of the data, it became evident that this wasn't a great jobs report after all. Back month revisions showed there were 49k fewer jobs in the past two-months than previously reported. Additionally, the labor force contracted by 540k, perhaps reflecting renewed pessimism about finding a job. Additionally, the University of Michigan consumer sentiment index tumbled to 74.5, its lowest reading since August. It was a huge miss, given that expectations where 82.8.
The mixed bag of data and ongoing concerns about the fiscal cliff and debt ceiling made the early sell-off in gold a pretty appealing buying opportunity. The range low at 1672.68 (04-Nov) remains intact, as focus now turns to next week's FOMC meeting. There are pretty high expectations that the Fed will announce it intends to restart outright Treasury purchases after Operation Twist concludes at the end of the year.
If we drop over the fiscal cliff at the end of the year as well, and it looks like another recession is in the offing, the Fed would likely step up and heap additional accommodations of some sort on top of that even. More debt, more dollar, more QE; these are some of the key factors that have driven gold markedly higher over the last dozen years. With no sign that this is going to end any time soon, I would offer that the long-term underlying uptrend in gold isn't going to end any time soon either.
However, after closer examination of the data, it became evident that this wasn't a great jobs report after all. Back month revisions showed there were 49k fewer jobs in the past two-months than previously reported. Additionally, the labor force contracted by 540k, perhaps reflecting renewed pessimism about finding a job. Additionally, the University of Michigan consumer sentiment index tumbled to 74.5, its lowest reading since August. It was a huge miss, given that expectations where 82.8.
The mixed bag of data and ongoing concerns about the fiscal cliff and debt ceiling made the early sell-off in gold a pretty appealing buying opportunity. The range low at 1672.68 (04-Nov) remains intact, as focus now turns to next week's FOMC meeting. There are pretty high expectations that the Fed will announce it intends to restart outright Treasury purchases after Operation Twist concludes at the end of the year.
If we drop over the fiscal cliff at the end of the year as well, and it looks like another recession is in the offing, the Fed would likely step up and heap additional accommodations of some sort on top of that even. More debt, more dollar, more QE; these are some of the key factors that have driven gold markedly higher over the last dozen years. With no sign that this is going to end any time soon, I would offer that the long-term underlying uptrend in gold isn't going to end any time soon either.
