Why gold plunged

Posted | 07/10/2014 / Views | 2130
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Australians awoke Saturday morning to a gold price that had dropped within a whisker of its resistance line of US$1180 because of the “strong” US jobs numbers released late Friday our time.  So let’s (again) scratch the surface of the headline 248,000 new jobs and unemployment rate of 5.9% that all rejoiced as proof of the new strong US economy.  For a start, whilst 248K jobs were added, the 315,000 who dropped out of the labour market didn’t get much attention.  That took the US employment participation rate down to a 36 year low of 62.7% or in real people terms, 92.5m working aged people who do not have a job.  Stepping back a little further Friday’s numbers showed 155.9m were employed (including the alarming rise in part time positions over full time positions, the fact that most growth is in low paying services roles, and that real median family income has declined to a level of 20 years ago).  Back at the time of the GFC this number was 154.9m, or about 1m less.  However, the number of working aged people has increased by 14 times that!  So whilst the number is good news, the way the market reacted is indicative of one looking for a good headline rather than a structural improvement in the US economy.  You will note the price has retraced all of that drop already and the USD1180 line in the sand still holds firm…