The price of Gold has plunged and the dollar has rallied strongly after the US government reported a surprise drop in the unemployment rate to 10 percent.
Those that felt that Gold was not a “dangerous” trade are looking a little shifty this evening. Gold is currently trading at $1149 an ounce, down nearly $59 on the day and way below the mystical $1200 mark, much beloved of the recent bulls/bandwagon merchants.
Meanwhile, the U.S. Dollar has surged against all major currencies. Pre-report estimates were for the unemployment rate to remain unchanged at 10.2 percent. In addition, the total jobs lost came in at 11,000, well above the consensus estimate of 125,000. The October job loss was also revised lower.
Traders rushed to buy the Dollar on the back of the surprise news, as it raises the possibility that the Federal Reserve might be forced to raise interest rates much sooner than most had expected.
One City of London Prop trader, who wished to remain unnamed, said that he had been skinned after betting that the unemployment numbers would come in at worse than consensus;
“When the 10000 number came in, there was an audible gasp, followed by silence… then everybody rushed to close out their positions. Once again the market has taught us all a hard lesson… I don’t know of a single person who was short Gold, long the dollar at this time.”
I commented on this here:
http://www.midasoracle.org/2009/11/27/dennis-gartman-dubai/#comment-27503
“I sold most of my gold today at levels that look pretty good by now. I did not anticipate an extraordinarily strong payrolls number/revision, but the reaction in gold only confirmed my overall logic on the trade. That is, as long as unemployment is weak, rates will be near zero and gold will be attractive, but now I don’t see a catalyst for new highs in gold for the remainder of the month.
And not to be conspiratorial, but there was all the political reason in the world to get those numbers up.”
If unemployment continues to decline, and rate expectations continue to rise, then, yes, gold will not be attractive for a while.
I hope you shorted more recently. Even after today, it looks like gold is still higher than where you first declared your short here.
http://www.youtube.com/watch?v=TQWrJoHoDIE
Anecdotally, type “nintendo wii” on bing.com
As of right now it gives you 15% cashback on Ebay buy-it-now.
This morning you could buy gold on Ebay at $1080/oz, $100 below spot at the time.
I wasn’t buying today, but that’s how I bought whatever physical gold I have. This time last year you could get gold in the low $700s with 20-30% cashback rates (then live.com).
In other words, Microsoft gives you money to buy gold.
The only catch is that you are limited to $2000/year in cashback.
Jason
If you had read what I wrote, I said short Gold (1138) and long the dollar (75.280).
I have seen (on ZeroHedge) the argument that the employment figures are incorrect, because of a flawed methodology. However, I also note that Canada’s unemployment rate fell to 8.5 per cent as the economy gained an unexpected 79000 jobs (perhaps their figures are flawed too) .
If you shorted at 1138, and Gold is at 1162, that’s consistent with what I wrote and what I remembered.
Peter Schiff still bullish on gold:
http://www.youtube.com/watch?v=dQUSjOw2cYE
The Canadian figures are probably wrong, too, as you noted. The only way they could be right is if all of the business owners that went bankrupt in October got jobs in November. Highly unlikely.
Best guess: this makes Harper’s “stimulus” package look like it’s working, so they can shut off the taps at the end of this month.