As I write this (Friday afternoon), the price of gold has fallen from a recent high of $1,218 per ounce on December 2nd to $1,119 on December 10th. Ninety-nine bucks in nine days. Pretty scary, hmm?
But on the other hand, we have merely lost the spectacular gains achieved since November 13th. We are about exactly even from 30 days ago. Plus, we’re still up about $300 (about 36%) over the past year.
Besides, statistically, November is usually gold’s best month—and this last November was a doozy. But now, come December, perhaps our spectacular November will be “averaged out” with a dismal December. We shall see.
But why is gold falling?
The fallin’ follies began on Friday, December 4th when Reuters headlined that :
“US gold below $1,200/oz as dollar rallies on jobs
“NEW YORK, Dec 4 (Reuters) – U.S. gold futures dropped below $1,200 an ounce in heavy trade on Friday, losing more than 2 percent as a surprisingly strong jobs report boosted the dollar and triggered worries that the Federal Reserve could raise interest rates.”
As an apparent result of this decline in unemployment, the price of gold fell $50/ounce by Saturday.
The New York Times agreed with Reuters— significant economic consequences had been triggered by a surprising fall in unemployment rates:
“Jobs Report Is Strongest Since the Start of the Recession
“The nation’s employers not only have stopped eliminating large numbers of jobs, but appear to be on the verge of rebuilding the American work force, devastated by the recession.”
Oooo—so we’re rebuilding the American workforce, are we?! Sound great!
“The unexpected improvement comes as a relief to the Obama administration . . . . In the best report since the recession began two years ago, only 11,000 jobs disappeared last month . . . .”
Darn! Things are definitely looking up!
“. . . and the unemployment rate actually dipped,”
“. . . to 10 percent, from 10.2 percent the previous month.”
. . . say whut?
In the best unemployment figures in two years, the unemployment rate fell by only two-tenths of a percent? Heck, I’ll bet the unemployment rate can’t even be cal within a two-tenths of a percent margin of error. And this—a two-tenths percent fall in unemployment—is cause for celebration, economic optimism and even a dramatic fall in the price of gold? Ohh, pulleese.
A two-tenths percent change (even to the good) strikes me as much ado about nothing. Nevertheless, the NYTimes cheers that “More than 50,000 temporary workers were hired, the first surge in months and often a precursor to companies hiring permanent workers.” (But don’t retailers always hire thousands of additional temporary workers for the Christmas holiday rush?)
“. . . once the economy turns and hiring resumes, nearly 18 million people are likely to be vying for jobs . . . . In a strong economy, the work force seldom grows by more than 300,000 workers a month.”
These numbers indicate that if the economy became strong today and hiring resumed, it would still take another 60 months (at 300,000 new hires per month) to employ the current 18 million unemployed. That’s five more years—minimum—before we get back to where we were in, say, early A.D. 2007. And that’s if the economy became strong today.
Maybe we’d better put the champagne back in the cellar and the party hats back in the closet. Maybe it’s a little too soon to start singing “Happy Days Are Here Again!” Maybe a two-tenths percent fall in unemployment is really insufficient to justify a rising stock market and a falling price of gold.
But the NYTimes was not discouraged. They published another article on December 4th entitled “OFF THE CHARTS The Jobless Rate May Have Hit Its Peak”
“The peak in unemployment in the United States has probably passed, according to one economic indicator that has proved reliable in all 10 previous recessions since World War II. . . . That indicator is part of the monthly survey done by the Institute for Supply Management [I.S.M.], in which manufacturing companies are asked if their business is getting better or worse.”
I’m impressed by any indicator that’s “proved reliable in all 10 previous recessions.” Maybe Happy Days Are Here Again.
On the other hand, I’m unimpressed by an indicator that’s merely a “survey” of the opinions of CEOs who are “asked” whether their businesses are getting “better or worse”. Opinions are subjective. More, CEOs are paid to pump sunshine; it’s part of their job description. What CEO would willingly admit his company is going bankrupt before they file the papers? The I.S.M. survey results are unsupported by tangible data and (in a world where economic figures are routinely falsified) easily manipulated.
“The I.S.M figures showed that for the fourth consecutive month, more companies thought business was getting better than believed it was getting worse. . . . In the past, two such months of gains in the I.S.M. employment component always came after the recession was later determined to have ended, and usually after the unemployment rate had begun to decline.”
Again, this sounds pretty impressive. (Go back down to the cellar and get that champagne.)
“The I.S.M. numbers are weighted so that any number above 50 shows growth, and any number under 50 shows declines. Numbers far above or below 50 indicate that most companies are reporting the same trend. The employment indicator in November was 50.8, down from 53.1 in October and an indication that only a few more companies said they were adding workers than said they were reducing employment.”
(Ahh, crap. Cork the champagne and stick back in the cellar.)
I understand that the “I.S.M” has had four consecutive months of increases and usually it only takes two months of increases to mark the end of a recession. But if the November measurement was actually down from 53.1 to 50.8—and the dividing line between good news and bad news is the 50.0 point—then it appears that the I.S.M survey “evidence” is at best tenuous and, again, little cause for celebration.
“I.S.M. reports by manufacturers that more are hiring than firing has not yet been confirmed by the Labor Department’s establishment survey. It found that 41,000 manufacturing jobs were lost in November. There have been no monthly increases since November 2007 . . . .”
Just as I suspected. While the manufacturing CEO’s are “pumping sunshine” that their businesses are getting “gooder and gooder,” those sunny opinions are contradicted by facts. How can the manufacturing industry be doing better at the same time they’ve lost 41,000 jobs? How can the manufacturing be doing better if they haven’t actually added any jobs in two years?
(Better sell that box of party hats. Use the proceeds to buy some dehydrated food.)
“. . . long-term unemployment remains a major problem. The number of unemployed workers who have been out of work for less than five weeks has fallen to 2.8 million. . . . But the number of workers who have been without a job for more than 26 weeks rose to 5.9 million in November, the highest ever and more than double the number in January. The median duration of unemployment is up to 20.2 weeks, and the average figure is now 28.5 weeks. Both are records . . . .”
Double since January? Records? Two records!
How the heck can gov-co and mainstream media see “Happy Days” based on nothing more than two-tenths of a percent fall in the rate of unemployment? The stock market goes up and the price of gold goes down based on a two-tenths of a percent fall in unemployment?! That’s a bunch of crapola.
For a closer description of the truth of the matter, consider The National Inflation Association’s report entitled “Unemployment Decline An Illusion, Financial System Collapse Ahead”:
“On Friday it was announced by the Bureau of Labor Statistics that the U.S. unemployment rate in November declined from 10.2% to 10%. While the mainstream media would like you to believe we have seen a peak in unemployment and the worst of the economic crisis is behind us, we know that this dip in the unemployment number is phony and the recession is only beginning.
“Although the unemployment number dipped in November, we still lost 11,000 nonfarm jobs. Unemployment fell by 0.2% only because the civilian labor force shrunk in November by 98,000 people. This means more people are becoming discouraged and giving up looking for jobs. When you combine both short and long-term discouraged workers who aren’t included in the labor force along with those who are underemployed with part-time jobs, real unemployment in the U.S. today is nearly 22%.”
So—if the price of gold will drop $99/ounce based on government and mainstream news reports that our unemployment rate dropped from 10.2% to a mere “10.0” (Hooray!!!)—what do you suppose would (will) happen to the price of gold if (when) the gov-co and mainstream media are forced to admit that the real unemployment rate is not 10.0%, 10.2% or even (gasp!) 10.4% but “nearly 22%”? The price of gold will jump like a jackrabbit.
“The most important area of employment to look at is manufacturing jobs. Increasing manufacturing is the only way for our country to truly recover and build real wealth, because it will allow us to cut down on inflation by exporting real products instead of the money we print. Unfortunately, the U.S. lost 41,000 manufacturing jobs in November and has lost 2.1 million manufacturing jobs over the last two years.
“The main areas of increasing employment in November were health care and government jobs, which are non-productive . . . . These jobs are not being created due to a strengthening economy, they are being created due to our artificial, temporary and destructive stimulus. They are forcing our country to get deeper into debt and create massive inflation.
“Those who receive a paycheck for a non-productive health care or government job, compete against all Americans for the purchasing of consumer goods, without contributing to an increase in the supply of goods. This means after excess inventories of goods are worked off, prices of all the goods we consume will increase at an astronomical rate that is unimaginable to most Americans today.”
And that means the price of gold—currently down $99 from its recent peak—will also increase at an “astronomical rate”. If you’re curious about when such hyper-inflation may begin, the National Inflation Association implies that you should study statistics on the supply of inventories of American-made goods. Once those inventories are exhausted, hyper-inflation should begin.
Don’t be fooled. Whatever is causing the price of gold to fall, it’s not a two-tenths percent fall in the unemployment rate.
In truth, the price of gold has fallen $99/ounce based on a simultaneous and surprising two point rise (from circa 74.3 to about 76.6) in the U.S. Dollar Index. I’ve said for several weeks that the gov-co seems almost desperate to prevent the US Dollar Index from permanently falling below the 75.0 mark; that every time the dollar does fall below 75, it soon jumps back up like Lazarus. Last week, the Index was mostly in the 74 range. This week, it’s jumped back up into the 76 “stratosphere”.
But what, in objective truth, made the paper, fiat dollar’s apparent value rise two points in the past ten days? Can you think of any reason why the intrinsically worthless dollar should be worth more today than it was a week ago? I can’t.
The US dollar Index jumped two points, alright, but that jump had to be caused by manipulation rather than objective truth.
Despite what gov-co might have you believe, the world still (ultimately) runs on objective truth. There is reason. There are facts. There is physical gold. In the end, the lies on which our government and banking system are based will succumb to the truth.
At that point, the price of gold will skyrocket.
In the meantime, you might still break out the champagne and party hats. The $99 fall in the price of gold has created a temporary but memorable Holiday buying opportunity. Enjoy.