I'd be lying if I said I was surprised by Monday's Precious Metals [PM] response to Friday's Nonfarm Payrolls numbers. It is never a mistake to expect the worst when anticipating a reaction to economic data. It forces us to prepare to take action if, and or, when our PM position reacts negatively to data. Today's PM performance tells me that their markets judge the jobs number benign. Which is what we believed the jobs report to "truly" be...irrelevant.
Today's PM reaction to the jobs number only reinforces the distrust the global investment community now has for the US Dollar...As of 11PM EST the Dollar has already rolled over and given up it's gains initiated by the irrelevant jobs number. It also sends a clear message that things may be a lot worse than we already suspect they are in our economy.
The Fed has already gone on record with their "uncertainty" about which direction the US Economy is heading. It's clear they are stuck between a rock and a hard place when it comes to any break up or down in the "pace" of the economy...too fast, raise rates -- too slow, cut rates. The PMs today are sitting in the cat birds seat as the Fed faces an economic future of Stagflation.
This word has begun to pop up more and more in commentary and analysis of the US Economy. What is Stagflation? Wikipedia describes Stagflation:
Stagflation, a portmanteau of the words stagnation and inflation, is a term in macroeconomics used to describe a period of high price inflation combined with slow output growth, high unemployment, or recession. The term Stagflation was first used by Dr Peter Beter, ex-general counsel for the Export-Import Bank of the United States--Originally incorporated as the Export-Import Bank of Washington in 1934. "Stag" refers to a sluggish economy, while "flation" signifies rapidly rising consumer prices.
Stagflation is a problem because most tools for directing the economy, that is fiscal policy and monetary policy can trade off growth for inflation. Either they slow growth to reduce inflationary pressures, or they allow general increases in price to occur while generating output growth. Stagflation creates a policy bind in which efforts to correct one problem can worsen the other. The dilemma in monetary policy is instructive. The central bank can make one of two choices, each with negative outcomes. First, the bank can choose to stimulate the economy and create jobs by increasing the money supply (by purchasing government debt), but this risks boosting the pace of inflation. The other choice is to pursue a tight monetary policy (reducting government debt purchases in order to raise interest rates) to reduce inflation, at the risk of higher unemployment and slower output growth.
To read more about Stagflation click here: http://en.wikipedia.org/wiki/Stagflation
Stagflation will be very good for Gold and Silver Assets. It will be very bad for consumers. Protect and enhance your wealth. Buy Gold and Silver on the dips and always maintain a core position in your metal(s) of choice.
Did you see the move in Copper today? http://stockcharts.com/h-sc/ui?s=%24copper
This dip in oil will be brief: http://stockcharts.com/h-sc/ui?s=%24wtic
Silver Resistance: 13.80 / 13.88 / 14.04
Silver Support: 13.67 / 13.60 / 13.54
Gold Resistance: 674.50 / 677 / 684.30
Gold Support: 670.30 / 666 / 657.50