The Daily Market Report: Gold Retreats Further Within Range, Awaits Jobs Data


30-Sep (USAGOLD) — Gold has retreated further into the range after last week’s gains stalled shy of the important 1156.66 resistance level. Support at 1103.60 remains well protected at this point, as the market looks ahead to Friday’s release of September jobs data.

The ADP employment survey came in at +200k, which was above expectations of +190k. Nonetheless, in the wake of recent drops in producer and consumer sentiment there is perceived to be some downside risk.

Just today, Chicago PMI for September unexpectedly fell to 48.7, well below expectations of 53.4. Indications from U.S. industry have been presaging recession; not exactly an environment where any central bank — and particularly not one that is historically dovishly biased to begin with — would be considering a rate hike.

In a recent blog post entitled Yellen Stumbles (sign-up required), Westshore’s Jim Rickards takes Fed chair Janet Yellen to task for her intellectual dishonesty with regard to inflation expectations versus inflation reality.

Yellen contends that inflation expectations remain anchored around 2% and any deviation from those expectations are presumed, at least by her and the Fed to be “transitory.” Rickards on the other hand says, “it seems as likely that expectations will converge to reality rather than reality converging to expectations.”

One hardly knows where to begin in describing the flaws in Yellen’s analysis. Her model is entirely theoretical with no substantial empirical proof. The “forecasts” she relies on have been erroneous by orders of magnitude for years. — Jim Rickards

Fed forecasts do indeed seem to be based more on hope than reality: We’ll put rates at zero for nearly a decade and expand our balance sheet by $4 trillion and hope that garners at least 2% inflation. So far, not so good.

Given the Fed’s persistent failure on the inflation front, I’m inclined to concur with Rickards when he says, “The Fed will be no closer to raising interest rates in October or December than they were in September.” I believe that to be true regardless of what the jobs data say at the end of the week. However, if the data miss expectations it is certainly likely to sway many more investors to start thinking the same.

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