Gold and silver took a hit on much better than expected non-farm payroll numbers this morning, but markets quickly keyed in on the dark underside of the big numbers.
The metals quickly regained most of the loss, even though the dollar was sharply higher on the report. The DXY dollar index jumped to 79.83, a six-week high, in a matter of a couple minutes, and is hanging on to those gains.
The Bureau of Labor Statistics reported that 288,000 jobs were added to the U.S. economy in April, compared to expectations of 215,000. The eye-opener was the unemployment rate plunging from 6.7% to 6.3%. However, bad news lurks under the brightest part of the report. The unemployment rate fell so much because of the number of people giving up and no longer actively seeking employment. The way the government counts people, if you give up looking for a job, you aren't unemployed any more! The "labor participation rate" dropped to 62.8%, meaning less than 2/3 of Americans are working or actively looking for work. Daniel Alpert, managing partner of Westwood Capital, says "the hiring is kids under 20 and old folks over 55 holding on and not retiring. Middle-aged groups are hollowing out."
In Europe, composite EU unemployment remained flat at 11.8%. This is mainly due to extremely high unemployment rates in Greece, Spain, and other distressed economies. The composite EU manufacturing PMI rose slightly to 53.4 from 53.0. This was right in line with expectations of 53.3, French PMI shrank to 51.2 from 52.1, but still wasn't as bad as was expected. German PMI was about in line with forecasts, rising to 54.1 against expectations of 54.2
The government of Ukraine has launched military operations against rebel-held cities in its industrial heartland of eastern Ukraine. Two helicopters were shot down by militants as gunfire erupted around the separatist stronghold of Donetsk. The elected mayor is being held hostage, and the militants have declared independence from Ukraine. Despite the start of a civil war, markets seem to be ignoring the developments.
Physical gold demand is muted today, as Chinese markets are on holiday. London markets are closed Monday, and Tokyo is closed Monday and Tuesday. Hong Kong markets are closed Tuesday. It will be Wednesday next week before we have all major gold markets back in the game, so prices may be volatile until then. This may present sharp-eyed investors a chance to buy on a dip.