Scoreboard: Gold meddling

Gold was hit hard overnight while improved jobless claims failed to move investors.

Who knows what’s driving it. There’s been a bit of press recently about Russia’s central bank selling gold and then another press report suggesting that consumer demand for gold out of India has weakened. And then of course the ever elusive taper is always in the background. Whatever the reason, gold was hit hard over night, falling $24 to $1325. Silver was hit even harder – slumping 4.5 per cent. It was basically a commodities rout and copper was off 0.8 per cent while crude fell 0.5 per cent ($96.26).

Elsewhere though there was a distinct absence of news and it showed in the price action. Well not a complete absence – jobless claims of course were out and showed another improvement – down to 340 thousand in the week to October 25 which is a fall of 10 thousand.

There has been a lot of noise around the data of late, what with the shutdown and reporting problems out of states like California. So it’s probably too early to say whether this is the actual number of claims less those effects. Still, even if this print is the number of claims (clear of distortions), it is still consistent with ongoing strong jobs gains.

That the level of jobs is still below pre GFC peaks is a meaningless observation by the way. It says nothing about momentum. The reason the level of jobs is below pre-GFC levels isn’t because jobs growth is weak now. It’s because 8-9 million jobs were lost through the GFC – and that was always going to take many, many years to recover from. I think the next payrolls print is out next Friday, by the way, so that will be a key focus obviously, although the actual result will likely be distorted by the shutdown.

So, for the last October trading session, changes in the major US indices look to be little different to zero. Well that’s with about 30 minutes left to trade – S&P500 1763, Dow 15,606 and Nasdaq at 3931. For the month as a whole, the S&P500 is up 4.8 per cent. On the rates side, the US 10 year yield is little changed as I write at 2.54 per cent, although it swung around on a 7 bps trading range and is down 7 bps for the month.  

Not really much else out. In other news, the US Treasury has taken the unusual step of accusing Germany of having, wait for it, successful economic policies. The US Treasury criticized Germany for its export led economy saying that domestic demand growth was too weak.

Presumably the US Treasury is concerned that the Germans didn’t gear up to their eyeballs, selling loans to citizens who couldn’t afford them, then on selling those loans as triple A rated products to pensioners, church groups and local government – and start a financial crisis. Recall also that some policy makers in the US, Bernanke included and presumably the boffins at the Treasury, think that elderly Chinese people started the global financial crisis. True story.

Data wise, UK house prices rose 5.8 per cent over the year to October, which is the fastest pace in three years. The Eurozone unemployment rate was then steady at 12.2 per cent and inflation slipped to 0.8 per cent from 1 per cent annual growth.

Finally there wasn’t much action for the Australian dollar which sits a little lower than at 1630 AEDT yesterday afternoon – 0.9454 (0.9520 at the high). Euro is then down over a big figure to 1.3578 following that inflation and unemployment data, while Yen is at 98.32 (little changed).

Looking at the day ahead, the SPI points to a 9 point gain for our market. Data wise, the key stuff will come from RP Data-Rismark in the form of house prices. We know Aussie house prices are picking up and auction results remain very strong.

In addition to that we see producer prices and the RBA’s commodity price index at 1630 AEDT. Otherwise the Chinese manufacturing PMI at 12 will be closely watched. Tonight we get the ISM index for October, and the consensus expects a modest fall to 55.1 from 56.2. There are also three Fed speakers – Bullard, Lacker and Kocherlakota.

Have a great weekend…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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