Gold prices were barely affected this morning, as November non-farm payrolls slightly disappointed stocks. After a momentary blips downward, gold regained the modestly higher prices it held before the report. The news, however, erased any chance for the dollar to cut early losses, as the greenback sank lower. The easing dollar is helping gold prices leverage small gains.
The Labor Department this morning reported that non-farm payrolls grew by 178,000 jobs in November, under the 200,000 expected by Wall St. The unemployment rate took an unexpected plunge last month, for the worst of reasons: people are giving up finding a job, which in the government's eyes means they are no longer unemployed. This sent the jobless rate down from 4.9% to a nine-year low of 4.6%.
Stocks used the disappointing NFP report as an excuse to flip into defensive mode ahead of Sunday's national referendum in Italy, which could see the government of prime minister Matteo Renzi fall. The Italian government is famous for its inability to pass even the most minor legislation, and the constitutional amendment that is being put before the voters Sunday aims to streamline the Senate by eliminating "deadwood" seats while making sure it retains its authority,
Renzi has pledged to resign if the reform referendum fails, which has resulted in the bizarre coalition of anti-establishment parties joining the old guard politicians to defeat the measure. While the career politicians want to hold on the power, the anti-establishment Five Star Movement is voting AGAINST reform, because they know they can take power in the national election that will result if Renzi's government falls.
Like dominoes, the failure of the referendum will topple Renzi's government, which will mean Euroskeptic parties will gain control, which will panic the EU financial sector, which will cause the collapse of the failing Italian banking system. This will throw Italy into a Greece-style crisis, which would give a Euroskeptic Italian government the excuse to implement a long-held dream to pull Italy out of the euro Common Currency and re-introduce the lira.
Also on Sunday, Austria will hold Presidential elections pitting a far-right anti-immigrant party against an establishment coalition. Austrian Freedom Party leader Norbert Hofer is standing against the center-left. The chance of the Freedom Party gaining power in Austria is digging up old ghosts across Europe. The Freedom Party was founded in the 1950s by real, actual Nazis from World War II. In recent years, it has made strong attempts to move away from that heritage.
Now, Hofer and the party as a whole focus more on their anti-immigrant, anti-Muslim, and anti-Turkey stances. They dropped the idea of an "Austrian Brexit" vote after it failed to poll well, and have toned down their "fascist strongman" image to a more mainstream one. The possibility of a far-right party coming to power in Austria is hitting all the wrong notes with those who remember what happened the last time an Austrian fascist came to power.
There's no wonder that stock markets are going into defensive mode before closing for the week.
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