Gold and silver prices are doing it again. As this is written silver has shot up more than a buck to over $28.50 and gold has rocketed past the $1600 barrier. Both were holding steady early in the afternoon session.
The driver appears to be the dismal non-farm payroll report, which also clipped 192 points off the Dow and sent 10-year Treasury note yield down to 1.47%. The smallest gain in jobs in a year – only 69,000 were added last month, a net loss accounting for natural growth in the labor pool – also reversed the year-long decline in official unemployment figures.
But don’t break out the party favors yet. We have been through all of this too many times before. Although the jump in gold and silver prices is more than warranted, and the increases fall well short of where they should realistically be, today’s activity looks suspiciously like another knee jerk.
The gains took place in the first two hours of trade. Tomorrow, or perhaps even later today, some other bit of news is just as apt to drive gold and silver back down just as sharply. Besides, whenever prices surge ones and zeros start zipping about in Wall Street’s computers, and that is bound to trip a few triggers to sell.
The news isn’t really news at all. It’s just old hat and comes as no surprise to everyone who sees the economy for what it truly is. We have been given no reason to believe that the light of reason has suddenly dispersed the fog and that investors will not soon retreat to the comfort of wishful thinking.
Only after gold and silver prices start moving steadily upwards for a protracted period will we have cause to believe that they have finally resumed their rightful trajectories. In the meantime, we have to deal with June – and another fateful meeting of the FOMC.
The Fed has done a most laudable job of staying out of the markets for quite some time, but it is hard to believe that can last much longer. The pressure it is under to salvage the stock market is just too great. Only one tool remains in their box, trusty old QE.
None-the-less, while the silver price is dancing around $28.60, gold has begun to slowly climb. Just maybe my cynicism is unfounded.
Perhaps we are witnessing the beginnings of the long-awaited breakaway in gold and silver – a pleasant thought, if only for the moment.