Friday, May 06, 2005

U.S. Employment payrolls - Net Birth / Death Model

Todays gold price was down $6 apparently on the news that U.S. employment rolls increased to 274,000 last month, which was much higher than the average estimates from Wall Street.

Minutes after the news came out, Retuers said: "Gold futures in New York fell sharply in early trading Friday as a surprisingly strong U.S. April nonfarm payrolls report boosted the dollar and dulled the allure of bullion for investors."

The article came out so fast its almost like they new in advance!

The dollar rallied in response we are led to believe. Which apparently undercut futures prices for gold.

"In the case of gold, prices moved precipitously close to its 200-day moving average" said Dale Doelling, chief market technician of Trends In Commodities, reported.

"A close below this critical support level ... could tip the balance in favor of the bears for some time to come," he said. "The mid-April lows are the only thing between here and the logical downside target of $400, and this level could be reached quickly if we see some serious long liquidation in the event the market does break key support."

The Philadelphia Gold/Silver Index (XAU) was down 1.3%, the CBOE Gold Index (GOX) was down by 1.4% at 74.53 and the Amex Gold Bugs Index (HUI) dropped 1.6% to 182.07

Bob from Bob's Gold Price Column said "it's almost as if the G7 central banks were ready to buy the dollar as soon as the report came out. To conserve gold and silver they may be goosing the dollar instead, spending their foreign "currency" reserves instead."

"By tonight or tomorrow we'll have reports with the magic (hedonic
adjustments and all those type things) subtracted from this employment number so
that we'll have the real number. It could even be a negative number.

Just make sure you're taking the red pill. The spin out there is really
something." Bob says.

This is from the U.S. Department of Labour Bureau of Labour Statistics website, which produced these employment figures based on their Current Employment Statistics Net Birth/Death Model:

" The most significant potential drawback to this or any model-based approach is that time series modeling assumes a predictable continuation of historical patterns and relationships and therefore is likely to have some difficulty producing reliable estimates at economic turning points or during periods when there are sudden changes in trend. BLS will continue researching alternative model-based techniques for the net birth/death component; it is likely to remain as the most problematic part of the estimation process."

There is a little table on the U.S. Department of Labour website that says they estimated 257,000 of the 274,000 jobs in April using CES Net Birth/Death Model. That means that only 17,000 real jobs were actually created, the rest of the jobs were hypothetical jobs created with a statistical model.

And the reason the gold price was down $6 was???

Read Bob's latest article Gold and Silver Market Bottom

UPDATE: The gold price closed down only $4 for the day after bouncing back up from the long term uptrend and the bottom of a large wedge / triangle formation that has been developing which is very bullish for gold.

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