-- Posted Friday, 7 November 2008 | Digg This Article
| Source: GoldSeek.com
The Morning Gold Report by Peter A. Grant
Nov 07 a.m. (USAGOLD) -- Gold remains confined to the recent range in the wake of another dismal jobs number. This morning it was reported that nonfarm payrolls for Oct plunged 240k.
Sep payrolls were revised significantly lower as well, from -159k to -284k. The economy has now lost jobs in ten consecutive months and the unemployment rate stands at 6.5%, a 14-year high.
The US stock market has rebounded as expectations of a sharp drop in employment were largely priced in over the previous two sessions. However, the trend in employment remains rather disturbing and has increased concerns that the anticipated recession will be a deep and painful one.
This obviously does not bode well for stocks in the long-run. We anticipate that ongoing volatility in equities is going to continue driving safe-haven interest in physical gold.
Ford reported a $3 bln Q3 loss today and said that it would cut jobs and sell assets to stem the tide of red ink. Reports suggest that Ford may only have cash reserves to operate for another 7-months. Ford says they have sufficient reserves to get through 2009.
GM also reported a huge Q3 loss of $2.5 bln. Dwindling reserves suggest the company may be forced to shut down unless they get a capital infusion. Shares have tumbled in reaction.
The US auto industry is in dire straights to be sure. The big three US auto manufacturers are all facing similar circumstances. Sales have plummeted as consumers have scaled back on big-ticket purchases and those that may be considering buying a car continue to find it difficult to secure credit. Might the auto industry be the next in line for a government bailout? They're pleading their case on Capitol Hill today.
Fed funds are already at a historic low of 1% so there's not much more the government can offer in the way of interest rate relief to stimulate sales. In fact recent cuts to Fed funds have done little to free up interbank and consumer lending. A bailout may be the only answer. It seems doubtful that the government would allow Ford, GM or Chrysler to fail.
VM Group reported that gold miners had further reduced forward sales in Q3 to just 16.5 million ounces. That's down 43% from the year-ago figure of 29.1 million ounces and -60% from the same period two-years ago. Reduced forward sales have a tendency to ease downward pressure on the yellow metal.
A breach of the recent range high in gold at $776.80 is needed to spark short-term probes above $800. A convincing close above $800 would clear the way for a challenge of the $850 zone.
Gold Market Movers:
US unemployment highest since 1994
Automakers' top brass plead to Congress for cash
IMF agrees $15.7bn loan for Hungary
Gold hedges fell by 2.3 million ounces in third quarter, VM says
'Cautious' investors looking to buy gold
