Gold prices moved lower after the blowout job numbers that came out Friday morning, as metals were unimpressed with America going back to work and the unemployment rate dipping below 8 percent for the first time since 2009.
In early trading gold remained down $15.37 to $1,776.98 and silver was down $0.29 to $34.69, for a silver/gold ratio steady at 51.2.
Commodities were generally lower in the wake of the jobs report, with crude oil, copper, platinum and palladium all trading lower.
The commodities markets are largely staying in line with currency valuations and the jobs report won’t make much of an impact there until the start of trading next week. Apparently gold and silver traders are expecting the jobs report to boost the dollar against the euro and are hedging early.
There are several conflicting forces coming to play on gold prices and what happens to prices going forward depends on which one wins out. You might as well fasten your seatbelt and get ready for a bumpy ride because when my crystal ball gets cloudy, that usually means volatility ahead.
If you look at a five year gold chart you’ll notice gold prices go up when the economy is recovering and trend down during times of recession. When times are bad, investors are selling gold to raise cash. When times are good they’re buying back that gold and pushing prices higher.
While it seems contrary to what you’d expect, it makes sense at a fairly basic level. People who need cash sell gold; people who have cash buy gold. If you look at countries like Spain and Greece, you’ll find very few in the middle class with any hard assets, like gold, left to sell. That’s because they’ve been selling their gold jewelry in order to get through times of unemployment.
Right now we’re at an odd point in the recovery, which has been frothy at best. We’re just coming out of the woods, but we’re not out yet.
Still, if the jobs report is any indication, the economy may be turning a corner. If that’s the case then you can expect gold prices to build a base at current levels and move higher in the days ahead, as they did from 2009 to 2011.