Outside Reversal Friday? Gold & Silver Stable After Coming Under Heavy Pre-Jobs Report Pressure

Gold & silver came under heavy selling pressure pre-BLS Jobs Report, but there may be a reason for that. Here’s the details…

Editor’s Note: Ol’ Half Dollar came out of the closet yesterday. No, not that closet – Half Dollar’s a traditional family man. He came out of the anonymity closet. I welcome you to read my bio below to learn a little bit more about who I am (Spoiler Alert: Unmasking the Half Dollar will be anti-climatic). Thanks.

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Here’s the thing about the “Jobs Report” and what it may or may not mean for Fed interest rate policy, and what that, in turn, means for gold & silver.

If the jobs lies data and therefore the broader economy is just crushing it, which I don’t think is the case, regardless of the statistics, then one would assume the Fed raising rates in a couple of weeks would be a given.

What has happened since the Fed began raising rates in December of 2015?

Gold & silver bottomed around that time, and have been on a general uptrend ever since:

One thing I would also like to point your attention to is what we talk about often as in “which leads, gold or silver”.

We can see that over the last few years, since bottoming, gold has indeed led the rally first (and outperformed silver), and as I am expecting, when the next leg up really begins in earnest, as in when gold finally breaks that $1378 level in general and $1400 specifically, by then we should see silver finally outperforming gold.

This is because silver is a smaller market than gold, so when things start moving, silver really starts moving in price as it takes less money coming in to cause larger percentage moves.

Back on track: We can see that since bottoming in December of 2015, despite the sideways channel of pure agony in 2018, gold is still up over 24% and silver is up over 20% since the Fed began hiking.

Stackers, especially dollar cost averagers, that’s not bad.

The point here is that there has been no indication so far that rising rates are “bad for gold”.

What about if the Fed doesn’t hike?

Well, it has to do with real interest rates.

You see, real interest rates are already negative (as I’ve briefly discussed in the chart above), even with the paltry rate “hikes” since December, 2015, but if the Fed doesn’t hike, with inflation picking up, then rates become even more negative in real terms than rates already are.

“Real interest rates” are calculated by subtracting the interest rate from inflation rate.

The argument goes like this, which I think is nothing more than stupid MSM propaganda, because they are looking at only one aspect of gold,. but here’s what the “pundits” argue: “Gold doesn’t pay any interest”.

Well, technically speaking, there are venues that to that do pay interest, but I digress.

Paying zero interest is better every day of the week than earning a real negative interest rate.

In other words, gold (and silver) is keeping up with inflation. When dollars in the bank lose money due to falling behind inflation, with matters made worse by real negative rates, then gold and silver are awesome alternatives.

That’s why gold and silver also go by names such as “wealth preservation”, “stores of value”, “inflation hedges”, etc.

So now that I’ve wrote a whole article within an article, let me get to the point: It doesn’t matter what the Fed does, based on junk economics and government liars statisticians, because at this point it will all be good for gold & silver.

Back on track and to the matter at hand – the BLS Jobs Report.

We can see in the pre-market action, when there are less participants and the markets are easier to move around, gold and silver have come under a steady barrage of selling to get price down in anticipation of the release of the jobs report:

I mean, we’ve got the traditional Niagara Falls of Gold & Silver pre-data release going on:

Which leads me to think that there could be an outside reversal today since they are determined to apply so much selling pressure on the metals before the report is even released.

Remember, we see what we call a “knee-jerk” reaction to the release.

Here’s how it works:

Trading is done by mathematical formulas called algorithms, and these trading firms, using high frequency trading computers, lightning fast intersection speeds, and big money, these firms (made up of lawyers, mathematical quants, and revolving door Washington/Wall Street Big Wigs) pay big bucks for a program and service called “Bloomberg Terminal” which pumps out the data feeds such as the BLS Jobs Report to the microsecond.

There are always knee-jerk moves because the algorithms can be executing trades a certain way, parsing key words from the report and making buy and sell decisions based on A.I., but as humans start to read though and digest, in a human way, what the report really means, then the true price movement of the markets starts to come through. This process usually takes 30 minutes to an hour when talking about one particular data point and one particular release.

In today’s case, however, I think the knee-jerk was applied before hand.

Right now, we are talking about the release of the May Bureau of Labor Statistics Employment Situation, otherwise known as the jobs report, which got released right on que at 8:30 a.m. EST.

Now don’t go thinking there’s not corruption and insiders who know what the release will say.

There surely is, just as sure as collusion and corruption permeate our society from top to bottom and bottom to top, which, in part, can explain then special need for the steady pressure this morning.

But I digress, let’s look at the May Jobs Report:

Well would you look at that. Downright smashing!

The Fed is going to really have a hard time not raising rates in June if going off of this number. You see, the headline number of 223,000 beat expectations, and, the unemployment rate dropped to 3.8 percent.

On the latter, be careful, unemployment is always the lowest right before bad things happen in the economy, as in recessions, because that’s when workers get the ax.

Here’s some charts and highlights on the BLS Job Report.

First, the expectations, from Econoday:

Notice the “beat” on both headline number and unemployment.

Now some charts and commentary from Zero Hedge:

Well, moments ago the BLS reported that in May the US economy created 223K jobs, smashing expectations of 190K, and indeed confirming that Trump “may have been on to something.”

At the same time, the US unemployment rate dropped again, sliding to 3.8%, matching the lowest print hit back in April 2000, and the lowest going back all the way to November 1969.

 

Looking at the labor force, the participation rate dropped a tad to 62.7% as a result of a flat labor force, while the number of employed rose from 155,181 to 155,474. Meanwhile, the number of people not in the labor force hit a new all time high of 95.915 million.

But Trump leak rumors aside, the most important number in today’s report was the Average Hourly Earnings, which rose by 0.3% M/M, beating the 0.2% consensus, and up 2.7% Y/Y, also above the expected 2.6% print, suggesting that wage gains may once again be on the table, and confirming that not only is a June rate hike guaranteed, but that there will be little to derail the Fed’s tightening plans for a considerable period of time.

What is the “Trump Leak” they are referring to?
well, this:

Which, when push comes to shove, is pretty anti-gold if you ask me. I mean, the mainstream narrative is that a booming economy (which we don’t have) and hiking interest rates are bad for gold, right? Hmmm. So it kinda make you wonder?
As for the knee-jerk, well, gold nearly lost $1290, but silver is just banging around in its usual “sideways channel of agony”:
The initial reaction was a drop down, followed by a slow rise.
But notice what was happening – The “knee-jerk” was essentially front-loaded today, and now, it looks like the metals are stabilizing at their levels.
I would be looking for an outside reversal today, which would include gold regaining $1300 and moving higher, and silver, well staying in its range.
And if we can hold at these levels, count it a moral victory in the sense that try as they may, the Cartel just is having the darnedest time with $1300..
And, there is still the chance of the quiet surprise to the upside I talked about on Wednesday, and an outside reversal later on today.
Finally, Fed Head Kashkari is speaking this morning, and he could certainly stick his foot in his mouth, although he generally avoids anything that would upset the markets and be good for gold.

 

So we’ll just have to see.

And as we can see now, gold & silver are fighting their way back up:

And to think, this is all done in the pre-market.

Stack accordingly…

– Half Dollar


 

About the Author

U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.

Paul’s free book Gold & Silver 2.0: Tales from the Crypto can be found in the usual places like Amazon, Apple iBooks & Google Play, or online at PaulEberhart.com. Paul’s Twitter is @Paul_Eberhart.

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