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LAWRIE WILLIAMS: Gold Price Spikes, Dow Seesaws, Dollar Falls as U.S. Jobs Fall Short

One moment on Friday the gold price looked as though it might have trouble in even staying above the $1,100 mark in the absence of Chinese buying due to the week long holiday there and then there was the latest U.S. non-farm payrolls report!  Not only did the numbers fall far short of most expectations at only 142,000 jobs created in September – the lowest figure for 18 months and well short of the consensus expectation of 200,000 plus – but the July and August figures were also both revised downwards as well.

In a knee jerk reaction the Dow plunged around 200 points, bringing it close to the psychological 16,000 level before recovering and, remarkably, ending over 200 points up on the day, while the dollar index also fell almost a full point to 95.2 before it also pulled back. 

The volatility in the Dow and other stock market indexes has to be worrying for investors and could start pushing them back to gold as a safe haven.  The Dow so far this year is down 7.6%, even after the 200 plus point rise on Friday.  (Per contra, the gold price in US dollars is only down 3% from its January 2nd price when Western markets opened at the beginning of the current year and is actually running higher in most other currencies.).  In the U.S., which tends to set the global tone, there are worries surfacing about likely corporate earnings levels this year – particularly for those companies which export much of their product where competitiveness has been sharply eroded by the strong dollar.

With sharelynx.com’s  latest Share Sensitivity Index seeing the 200 day moving average for a basket of 17 global stock indices (with a 41% weighting to the USA) falling below its 200 day moving average for only the third time since this data has been being collected some 12 years ago, there is an element of fear in the markets which, if it takes hold fully could turn a current correction into a rout.  (The previous two occasions when the 200 day moving average turned downwards were in 2008 and 2011.  In 2008 the Index more than halved while in 2011 there was a somewhat milder correction with it falling around 20%.  So far this time the fall has been around 13% globally.)

05 Oct 2015 | Categories: Gold

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