Unemployment Number Saves Gold
...but for how long?
This morning's huge surge in jobless numbers has knocked the dollar, thus causing gold to pop up nearly $20 as I write this near the open. The conclusion's simple enough: such economic weakness will prevent the Fed from raising rates anytime soon (Fed funds futures now suggest only a 2% chance the Fed will raise rates by year-end, down from 40% odds just one month ago).
Without these numbers, it looked like gold was poised for another sharp leg down. Why? Let's take a look at crude:
Not much of a bounce considering how technically oversold it had recently gotten. This is an especially poor sign that there isn't much strength here; those calling for sub-$100 oil are now looking quite likely to be proven right in the short-term. The charts of many commodities and commodity-related equities look similar right now, by the way.
Now here's a 1-year chart of gold:
Gold hasn't embarked on another down-leg of its own but you can see the set-up is very similar to that of oil: poor-looking technical action.
Today's jobs data looks like it may have saved gold from a similar fate, but that's not a sure thing at all. If its bounce this morning fades later today or in the next couple of trading sessions, expect another leg down. There's very heavy technical support for gold down near $700, but not much until then.
And regarding other commodities: aggressive traders shouldn't be nibbling here, but waiting to pick at even lower prices in coming weeks. I recently wrote that such aggressive trades were in order, but those should probably be stopped out of in most cases and attempted later because the bounce that materialized was so meager. Another chance to buy dramatically oversold commodities will materialize--perhaps soon-- but for now you just can't like this short-term action in commodities.
*After having taken a few weeks off, my weekly podcast, "Market Neutral," will return next Tuesday.