Gold and silver prices sprang to six-month highs as the
greenback plunged following a weaker-than-expected U.S. jobs
"With poor economic data, the European Central Bank being
proactive, a Federal Reserve meeting next week and a presidential
election occurring soon, it seems everything is lining up for new
liquidity measures by the Fed in the very near future," said
Christian Magoon, CEO of Magoon Capital and founder of
New liquidity measures mean printing more money, which
devalues to the dollar and increases prices for hard
assets.PowerShares DB U.S. Dollar Index Bullish (
), tracking the dollar against a basket of foreign currencies,
fell 1% to a four-month low. It broke below key price support at
its 200-day moving average last week, a very bearish
SPDR Gold Shares (
) surged 2% to 168.50 -- its highest level since March. In the
futures markets, gold lifted 2.16% to $1,739 an ounce.
"Gold is a trending market, so moves like this are not so
uncommon," said Janice Dorn, founder of
. "It looks like it can get to $1,750 to $1,800 an ounce before a
correction that may catch a lot of late-to-the-party-buyers by
Market Vectors Gold Miners ETF (
) gapped up 3% as it decisively broke above the key 200-day
moving average, which is critical to confirming a new
IShares Silver Trust (
) jumped 3% to 32.65.
Silver futures spiked 3.12% to $33.83 an ounce.
Global X Silver Miners ETF (
) flew 3% to 22.96.
Platinum, palladium and industrial metals and miner ETFs also
rallied thanks to coordinated central bank stimulus from Europe
and China. Should economic growth heat up, so will demand for
"While China has announced a number of new infrastructure
projects recently, inventories are very high and a report issued
about a week ago showed accounts receivable balances in several
of the industrial areas have jumped dramatically," said Alan
Rosenfield, managing director of Harmony Asset Management in
Scottsdale, Ariz. "Combine this with the decision not to open the
coal mine in Mongolia, BHP and Rio Tinto cutting projects, oil
demand declining and power production in the U.S. falling, and I
question the jump."
First Trust ISE Global Copper Index (CU) blasted 6% to 28.23.
But it's still trading below its 200-day average, where the
widest intraday price swings tend to occur.
Market Vectors Coal ETF (KOL), up 5% to 23.39, has been
trending lower for a year and a half and still trades below its
50- and 200-day lines. So today's action has to be considered a
Market Vectors Steel ETF (SLX), up 6% to 45.39, is also still
trading below its 200-day line. It's been trading in a sideways
range between 40 and 48 the past four months and is currently
near the top of that range.
Poor Jobs Report
The U.S. added 96,000 nonfarm jobs in August, far below
forecasts of 130,000 and well below the 163,000 increase in July.
The overall unemployment rate declined by 0.2 percentage point to
8.1% in August. But the decline was due mainly to more people
falling out of the workforce. The labor participation is at its
lowest level since 1981. That means people got so discouraged
about looking for work, they gave up and are not counted among
"The data will encourage the FOMC to act again at next week's
meeting," wrote Jim O'Sullivan, chief U.S. economist at High
Frequency Economics in Valhalla, N.Y.
Jobless claims and other data from the Institute for Supply
Management suggest that the unemployment rate will not rise, but
isn't low enough to satisfy the Federal Reserve, O'Sullivan
wrote. Looking on the bright side, the rate of employment growth
is much faster so far in the third quarter compared with the
second quarter. The U.S. has new jobs at a monthly rate of
119,000 in Q3 vs. 67,000 in Q2.
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