Employment Situation and GLD

It took a while after the whole Paulson Advantage Plus debacle last year to figure out what Gold's correlation was, it use to be reliably tied to the dollar, then it went through a high correlation to dollar debasement via the F_E_D Quantitative Easing programs, gold was easily the biggest beneficiary of dollar debasement, then after QE/POMO ended it took a bit to figure out what it was correlated to as it seemed it wasn't reliably correlated to anything, then it became clear gold's price movements were closely correlated with sentiment toward the likelihood of further F_E_D easing or QE3.

Thus the move in gold today is very easy to understand after the 8:30 Employment Situation/Non-Farm Payrolls...

Released On 9/7/2012 8:30:00 AM For Aug, 2012

	Prior	Consensus	Consensus Range	Actual
Nonfarm Payrolls - M/M change	163,000	125,000	70,000  to 177,000	96,000
Unemployment Rate - Level	8.3 %	8.3 %	8.2 % to 8.4 %	8.1 %
Average Hourly Earnings - M/M change	0.1 %	0.2 %	0.1 % to 0.3 %	0.0 %
Av Workweek - All Employees	34.5 hrs	34.5 hrs	34.5 hrs to 34.5 hrs	34.4 hrs
Private Payrolls - M/M change	172,000	134,000	80,000  to 177,000	103,000

96k jobs were created on expectations of 125k-130k, the actual is toward the lower end of the consensus range. This looks even worse compared to the July 163k print which as usual has been revised down to 143k. Private payrolls were lower, manufacturing jobs where actually lost, 15,000 of them on consensus of +10k, which is reflected in the manufacturing data we've seen this week.

The Headline unemployment rate actually came down from 8.3 to 8.1 (8.3 being previous and consensus), however underemployment which is how the US rated employment during the Great Depression or what is otherwise known as "U6" (vs the headline "U3") is at 14.7%. If you work 1 hour a week, you are counted in the U3 number, you are reflected only in the U6 number which is NEVER printed in mainstream media. The reason for the unemployment rate decline (U3) was because of a drop in labor force participation from 63.7 to 63.5, for reference, the 63.5% participation rate hasn't been seen since I was 9 years old in 1981; that's nearly 370,000 people laving the workforce.

To understand this chart...

 GLD up 2.11%, all you need to understand is what GLD is discounting with regard to QE sentiment and the very first sentence from Bloomberg's take on Non-Farm Payrolls,

"The odds of some kind of Fed easing at the September FOMC just went up as the employment situation for August was not pretty. "

As for current GLD charts, there seems to be some difference of opinion between the mainstream and conventional thinking and Smart Money's thinking...

 As we have heard in the mainstream press, the Department of Labor and the BLS acknowledge that there are leaks in the Non-Farm Payroll data giving (these are their words) "Some participants in the stock market an unfair advantage" and this is why they are creating a media center in which only BLS secure computers will be allowed, as that is not the case and reporters have these numbers on an embargoed status long before they are released so when they are released, analysis from the news organizations is instantaneous.

On this 2 min chart it appears there's a late afternoon positive divergence yesterday.

 There are signs of the same yesterday afternoon on the 3 min chart.

Longer timeframes, which are also more important and starting at 5 mins. have a different take...

 5 min GLD

 15 min GLD

 30 min GLD

And the hourly GLD that has provided, surprisingly good entries for us in the recent past, both long and short as we caught a long and short trade that set multi-year 1-day gains/losses.

This of course isn't the only data leaked, we use to see the EIA data leaked fairly consistently, and we've seen others, this however is by far dome of the most important data to have.

While Bloomberg's take seems reasonable and the longer term 3C charts don't seem reasonable with regard to conventional thought, remember the chart I posted of commodity inflation under the QE regimes? With food and gas seeing very high inflation and the manufacturing sector seeing (according to ISM reports the world over) input costs rising with declining output and prices, these charts may just make some sense.

While I don't have the time right now to give all the hard data and past reports especially from this week, it would seem any kind of flow via F_E_D easing would not only make consumer inflation worse, it may in fact send the unemployment rate soaring as the input costs rise for manufacturers with 80% of world manufacturing already in contraction.

Bottom line, I'm not so convinced QE is all that easy this year and if I had to guess from the charts above, I'd say smart money is betting the same.

I'll keep a close eye on GLD.