By James Brumley
The market has been fickle on gold of late, so Friday's rally might not last. Still, the bulls do have quite a few reasons to be optimistic.
What’s bad for the employment picture may be good for the stock market. But it’s bad for the U.S. dollar, which is good for gold and gold ETFs like the SPDR Gold Trust ETF (NYSEARCA:GLD)
Clear as mud? Actually, the chain reaction isn’t nearly as complicated to follow as it may seem.
Jobs Report: Bad News Is Good News
On Friday, the much-anticipated jobs report for August could only be categorized as disappointing. Economists were expecting the addition 180,000 new payrolls, which would in turn move the unemployment rate down from 4.9% to 4.8%. Instead, the nation only created 151,000 new jobs in August, leaving the unemployment rate at 4.9%.
In a twisted sort of way, the jobs report was good for stocks.
Although tapering job growth (we added 255,000 new jobs on July) is an indication of economic malaise, the prospect of rising interest rates has been far more terrifying to investors than the drag a tepid economy could be on the stock market. Had August’s jobs report shown strength for what would have been a third straight month of major progress, the odds of a rate hike at the next possible moment for the Federal Reserve would have soared.