Gold fell to challenge key support at 1182.10/1179.83 in overseas trading. This level successfully contained the downside, prompting a rebound back above $1200 as the dollar retreated from the new four-year high that was established in the wake of Friday’s better than expected nonfarm payrolls print for September.
The payrolls beat and the drop in the unemployment rate prompted a euphoric response in both the dollar and in U.S. shares. The dollar index reached 86.74, a level last seen in June 2010. The DJIA gained more than 200 points, reclaiming the 17,000 level.
However, while the headline numbers excited, a little scratching at the surface would have tempered the party. Cancel the Champagne, suggested a Housing Wire headline, because 230k of the 248k jobs added went to people in the 55-64 age group. The key 25-54 demographic actually lost 10k jobs in September.
Even The New York Times said, “there is no sign in the September jobs report, or in previous reports, of plentiful good jobs at reliably good pay.” The last part is the salient point. Given the demographic that successfully acquired jobs in September, I’d imagine most were part-time positions and the pay was probably at or near minimum wage.
According to ZeroHedge:
America added a whole lot of minimum wage waiters, store clerks, groundskeepers and temps…
With Europe likely heading back into recession, Japan perpetually teetering on the brink, and the fate of the U.S. economy still very-much up in the air, I think it’s going to be very difficult for the Fed to start tightening policy. When the market grasps that reality, a lot of the recent dollar rally may get unwound in a hurry.