Gold bounces back as jobs report bombs - Wealth Managers

Syrian crisis still smoldering as Russia's Putin vows to intervene if strike occurs

Gold prices jumped by $30, or almost 2%, on Friday after the widely watched August U.S. employment report missed expectations, thereby calling into question when -- and by how much -- the Federal Reserve might begin tapering its massive stimulus program.

Rising from about $1,360 to above $1,390 at its session peak, gold's advance largely erased Thursday's losses incurred after a slew of U.S. economic reports, most notable an ISMservices-sector report that printed at a record high. It later pared its gains to end slightly down on the week, while silveralso rose for the day and the week.

Meanwhile, President Barack Obama reasserted his case for military intervention in Syria at the Group of 20 summit in St. Petersburg, hosted by Russia's Vladimir Putin, who in turn vowed to "assist" Syria if a strike occurs.

"There is a lot of uncertainty with Syria and the Fed tapering. Those two forces are very much on most traders' minds right now," said Albert Ng at Aurum Options Strategies.
"We still have a slow-growth economy"
Just how bad was the nonfarm-payrolls report from the Labor Department's Bureau of Labor Statistics? Although the unemployment rate fell from 7.4% to 7.3%, the number of jobs created missed expectations. Only 169,000 positions were created, versus predictions of 180,000. The overall rate only dropped because the labor-force participation rate fell to levels unseen since 1978.
Zero Hedge estimated that the actually implied unemployment rate rose from 11.2% to 11.4%. Meanwhile, although full-time job creation outpaced part-time jobs this month, the quality of positions created were poor. "Of the 169K jobs added, the vast majority, some 144K or 85% of the entire August gain, consisted of the lowest-paying jobs possible," Zero Hedge noted, citing 44K in retail, 43K in education/health, 27K in hospitality, 17K in government, and 13K in temporary help.

"We still have a slow-growth economy. It's the same old story," said Kathy Jones, fixed-income strategist at Charles Schwab. But is it slow enough to delay the Fed's tapering plan? Jones expects the Fed to reduce bond purchases at its Sept. 17-18 policy meeting, but by a smaller amount than it might have planned.
Tapering could come at slower rate
One poll also found that many analysts still expect tapering but to a lesser degree. Almost 60% of the market pros responding to a CNBC Flash Fed Survey launched just after the government's data were released said it is "somewhat less likely" the central bank will announce a slowdown in asset purchases after its September meeting.

Friday's gold gains were "triggered by the disappointing jobs growth," said Vedant Mimani of the Atyant Capital Global Opportunities Fund. "The thinking is that with the weak jobs market, the Fed will not taper this month, or "will taper-[light]."

Despite gold's rebound, though, it still has lost some momentum. Gold's "simply trading contra-dollar," said Tom Essaye, editor of the 7:00's Report. "But gold needs to get back above $1,400 an ounce to regain positive momentum."
 Syria means "fear" still "the word of the day"
CNBC contributor Anthony Grisanti of GRZ Energy alsopredicted tapering will be constrained by the latest jobs report: "After five years of stimulus, these numbers are simply not where they should be. So why would the Fed scurry for the exit now, instead of tapering down its bond-buying program at a more manageable rate? The idea that the Fed could taper less aggressively than originally thought is giving gold a bid. Right now, what gold is telling me is that we could get a taper of $10 billion to $15 billion, rather than $20 billion to $25 billion."

Syrian concerns also will keep gold supported, he said: "With the jobs number out of the way, we still have Syria to focus on -- and traders down here at the Nymex are telling me that no one wants to be short gold if the U.S. strikes Syria. After all, gold is something that people tend to buy in times of fear. And with the market unclear about what the ramifications of a U.S. strike on Syria could be, 'fear' is the word of the day."
Fed's hawks and doves weigh in
What have some Fed officials been saying about the direction of its stimulus. One noted hawk, Kansas City Fed PresidentEsther George, on Friday said the Fed could slow its bond-purchase program to $70 billion. "I continue to support slowing the pace of purchases as the appropriate next step for monetary policy. For example, an appropriate next step toward normalizing monetary policy could be to reduce the pace of purchases from $85 billion to something around $70 billion per month, then have purchases going forward split evenly between Treasury and agency-MBS securities," she said.

Conversely, Minneapolis Fed President Narayana Kocherlakota said the bank isn't creating enough stimulus. The Federal Open Market Committee's "own forecasts suggest that it should be providing more stimulus to the economy, not less," Kocherlakota said of the Fed's policy-setting panel.

The Fed "is failing to provide sufficient stimulus to the economy," he said. "The U.S. economy is recovering from the largest adverse shock in 80 years, and a historically unprecedented shock should lead to a historically unprecedented monetary policy response."

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