Birth-Death-ing Your Way To Prosperity

Fri, Jun 5, 2015 - 10:54am

As expected, the statistical guesswork of the BLS magically added 200M+ "jobs" in May. This has spiked interest rates and crushed the yen, which is now trading at levels not seen since 2002. What does this mean for the short-term future of the metals?

First of all, that nonsensical "birth-death" thingy. Again, based upon the statistical guesswork of past Mays, the BLS presumes that "X" number of businesses were started in May (birthed) and "Y" number of businesses were closed in May (death). They also presume the number of "jobs" gained or lost by these opening and closing business. The net number...the amount of guesstimated new jobs minus the amount of guesstimated job losses equals the "Birth-Death Adjustment".

For the month of May 2015, the BLS decided that the Birth-Death Adjustment was a whopping 213,000 "jobs". When combined with other new "jobs" discovered through their extensive <sarc> phone survey work, Hampton Pearson was allowed to breathlessly report "UP 280,000 jobs for May". And there you have it.

Because all of this "robust job growth" clearly signals a roaring US economy, everyone now is 100% confident that Mother Fellen is going to jack the Fed Funds rate 25 bps, perhaps as soon as this month.Up go US interest rates and The Pig. Down go all other currencies, particularly the yen.

And the yen, as noted above, is now trading at 13 year lows! WOW! Take a look at these two charts. The one on the left is just the last six months. The one on the right is the last 25 years.

In case you're wondering whether the all-dominating HFT algos still have gold and the yen tethered in a swirling ball of death, please observe the chart below:

However, in yesterday's podcast, we pointed out a couple of things:

  • the metals were getting quite oversold
  • the metals were approaching solid support areas just below $16 in silver and near $1170 in gold
  • the Specs rapid rotation back out of longs and into shorts, thereby "cleaning up" the CoT structure

Because of all this and the expected flush after the B/D-adjusted BLSBS, we thought there might be a tradable bottom made this far, so good.

After reaching all the way down to $1162, the August gold now has a last of $1169. Not a full FUBM but impressive nonetheless. Again, I'd just like to see us hold here and eek out a close back above $1170. July silver saw a low of $15.94 and it's back to $16.10. I'll take it! Why? Check these updated daily charts. If gold can hold here and close back above $1170, it stands an excellent chance of a "false breakdown" and reversal with a move next week right back into the $1180-1220 range that has contained it for nearly 90 days. Silver bounced from very near the trendline from the March lows and, if t can just come back a little farther and close today back near the $16.20 area, I think we can feel pretty good...all things considered.

Lastly, just a few words about the HUI. Every since the index hot that overbought peak a few weeks ago and proceeded to break down through its 100-day MA, we've been waiting for an oversold dip toward the 155 area that has been solid support. Well, with today's low of 158, I think we're pretty close. And look at how deeply oversold the RSI and MACD have become. The miners may not immediately spring higher from here but I don't think we have to worry about them falling dramatically lower, either. Nibble away, if so inclined.

Just two items to read this morning. First, Koos does his usual excellent job of clearing up the confusion raised yesterday by this article from Sputnik: The translation from Cyrillic to English must have added a few too many zeroes. Koos points out that, in the end, Russia is announcing that they plan to add about 400 mts of gold to their reserves. That's still A LOT and it certainly adds further pressure to the global physical market.

And last week's A2A guest, Alasdair Macleod, is out today with an update on his thinking regarding China and gold. You might find this interesting, too.

As I close, I have $1169 and $16.09. Watch those levels listed above and let's see how the week finishes out.


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Key Economic Events Week of 5/23

5/23 12:00 ET Goon Bostic
5/24 9:45 ET Markit Flash PMIs May
5/24 10:00 ET New home sales
5/25 8:30 ET Durable Goods
5/25 2:00 ET May FOMC minutes
5/26 8:30 ET Q1 GDP 2nd guess
5/27 8:30 ET PCE and Core PCE
5/27 8:30 ET Personal Inc and Spending
5/27 10:00 ET UMich 5-yr Inflation Exp.

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