Today, the U.S. Bureau of Labor released the November job numbers report…and what a report it was!
A total of 146,000 jobs were created in November and the “official” unemployment rate in the U.S. economy decreased to 7.7% from 7.9% in October (I’m sure politicians will have a heyday with this news—telling Americans they are getting people back to work).
But the devil, dear reader, lies in the details of the job numbers report! This is a classic example of a report looking good on the surface, but when you look inside, you say, “What just happened here?”
The underemployment rate stands at 14.4%– nothing to be excited about. Unlike the official unemployment rate, the underemployment rate includes those people who have given up looking for work and or have part-time work because they can’t find full-time work. The structure of the labor market is still wounded, no matter what you hear on the mainstream media outlets.
Looking at the statistics within the job numbers report, people are finding work in low-paying sectors like retail and healthcare. There have been 140,000 jobs created in retail sector in the last three months and 53,000 of them were created in November! And, while we’re hearing or reading that the housing sector is coming back, the job numbers report says that 20,000 jobs were lost in construction in November!
Now here comes the real kicker in the job numbers report…
The average time a person is unemployed is continuously going up. In November, the average unemployed person in the U.S. economy was without a job for 40 weeks! This number has skyrocketed since the beginning of 2010. The average time a person was unemployed in January 2010 was 30.3 weeks. (Source: Federal Reserve Bank of St. Louise, November 2, 2012). There are currently 4.8 million people in the U.S. economy who are long-term unemployed.
The chart below is a scary one. It shows the continuing rise in the time it takes someone to find a job in the U.S. economy. In January 2000, it took 13.1 weeks for a person to find a job; today, it takes 40 weeks.
Copyright Lombardi Financial 2012; Data source: Federal Reserve Bank of St. Louis
Dear reader, the official unemployment rate going down may be welcome news to the layperson. But sadly, when you look at the details within the job numbers report, a deteriorating picture of the overall labor market in the U.S. economy is painted.
With companies seeing their corporate earnings growth decline in the third quarter of 2012, it won’t be too long before they start cutting costs and laying off employees again. This economist, for one, expects a worse employment picture to emerge in 2013.
The gold bullion prices have taken a hit recently, and some gold bears are taking advantage of it. They are speaking against the yellow metal and claiming that their predictions are precise. Dear reader, I still stand firm on my belief that gold bullion prices will rise and that any pullback in the price of gold bullion should be taken as a buying opportunity.
Looking at the chart of gold bullion prices from a technical analysis point of view, no major price support levels have been violated—meaning, the long upward trend in gold bullion prices was not broken when the prices decreased recently. The following is a chart of daily gold bullion prices going back to April of this year that shows the clear picture—that the recent sell-off in gold prices was nothing out of the ordinary.
Chart courtesy of www.StockCharts.com
Instead of showing bearish signals, technical analysis is suggesting that gold bullion prices are still holding their up trend, which began back in the month of May this year. Furthermore, technical analysis suggests there is significant amount of support available around the $1,680 level.
How low will gold bullion prices go if the selling pressure continues? Gold bullion is currently trading at a level where there is a significant amount of support—buying pressure. If gold bullion prices break below their current trading range, the next support level seems to be around $1,660—or the 200-day moving average.
Looking beyond technical analysis, there are fundamental changes occurring in the demand for gold bullion.
We know central banks are scrambling to buy gold bullion, as they are adding more gold bullion to protect their reserves. Global investments in exchange-traded funds (ETFs) backed by gold went up 56% in the third quarter of 2012, compared to same quarter last year. (Source: World Gold Council, November 15, 2012.)
In November, sales of U.S. gold bullion coins rose to a 14-year high. Investors bought 131,000 ounces of American Eagle gold coins produced by the U.S. Mint; this was three times the sales in November 2011 and the strongest November for sales of American Eagle gold coins since 1998. (Source: The Globe and Mail, November 30, 2012.)
I believe gold bullion prices will continue to rise—technical analysis and fundamental changes back this reasoning.
Special Bonus Article:
Words of Wisdom on Gold from Our Gold Guru
~ by special guest columnist Robert Appel, BA, BBL, LLB
As this is written, gold has taken out both the $1,710 an ounce and (psychological) $1,700 an ounce supports and the GDX has taken out the critical $46.00 support.
We believe the old adage that the greatest opportunities present themselves when “the herd” is doing one thing, so the “smart money” can do the other. For both older and newer readers, we want to review this strategy, because we think that, with hindsight, this attack (and that is what it is) will prove to be a memorable opportunity for those that want to keep their powder dry…
1. After an 11-year bull run, gold and the miners in 2012 had the worst year in recent memory.
2. Going into 2012, there were rumors that the Central Banks and their minions were determined to stop gold at $1,800, having failed at both $450.00 and $1,100 (two key levels).
3. Remember that history will show that the last 100 years have been a grand experiment in fiat (paper) money and many bankers have said both publicly and privately that the only and sole enemy of paper money is gold. Remove gold from the playing field and they can do whatever they want, when they want.
4. The Western governments (with the U.S. and the U.K. in the lead) use many mechanisms to control gold, including the ability to set margin rates, the gold lease rate, the use of clandestine “agented” brokers to whom they provide financial backing and key inside info, the fact that gold stores in Western vaults are unaudited and undocumented, the fact that gold purchased to back the major ETFs can legally be loaned out to short the market, the use of obscure bourses to dump gold in off hours, and, our favorite, naked shorting on the NY bourse, usually the moment it opens. There has never been a prosecution for naked shorting in the NY bourse, much like how, until recently, the Libor rate had never been suspected of being anything but genuine.
5. This is very brazen and actually shows signs of desperation. It is being done in a calendar period where seasonally gold is strongest. A message is being sent. But what does the message really mean?
6. For the last few years, the Chinese were (and are) the only counter-force to these short-term shenanigans. However the Chinese are right now distracted with their own internal government changeover, and many internal problems relating to the Stimulus Package they launched in 2008 and 2009.
7. If this market is just too hectic for you, we get that. But we say there is opportunity here. Numbers do not lie. China and the Asian block are becoming the strongest fiscal engine on the planet. Fiat money is an experiment destined to fail. Gold will see $2,500—and sooner rather than later.
8. With key support broken, the precious metals market will need several weeks to heal. Many former gold bulls will become card-carrying gold bears. Many small explorers, already short of cash, will find it hard to raise new funds in this environment.
9. But ultimately gold will reflect its natural demand, and ultimately the miners will reflect the fact that new gold has to come from somewhere. This is opportunity. The only thing that history will “remember” from this was that 2012 was simply not a good year for gold.