Gold Spikes On Payroll Disappointment

“Draghi Day” (Thursday) was something of an anti-climax as far as precious metals were concerned. Though the European Central Bank is now prepared to buy unlimited amounts of troubled euro-zone governments’ short-term debt, the purchases will be “sterilized”. This is similar to what the Fed has been doing with its “Operation Twist” -- offsetting new-bond purchases with asset sales. So the total euro money supply is not increased by this scheme.

A Big 'If'
What this does do is prop up troubled periphery governments, while boosting inflation in countries like Spain. At the same time, it is offering savers in countries like Germany bonds and/or savings deposits, which exerts a deflationary impact on the German economy. If all goes according to plan, this succeeds in stabilising prices across the currency bloc. The “if” in that sentence, though, is a big one.

This plan is basically about buying more time for the European Union to arrive at long-term political solutions. In other words, advancing the “fiscal union” agenda.

Metals Up On Off Jobs Report
Gold and silver prices surged Friday (UK time) on news of yet another disappointing monthly U.S. nonfarm payrolls report. Just 96,000 such jobs were created in August -- against consensus expectations of 130,000 -- while July’s number was revised down from 163k to 143k. And though the headline unemployment rate fell from 8.3% last month to 8.1% this month, 15,000 manufacturing jobs were lost compared with expectations of a gain of 10,000.

That somewhat grim note contrasts with President Obama’s repeated calls for a manufacturing renaissance in America, though ZeroHedge dryly notes that, “this report leaves the NEW QE door open, even as Obama can take the accolade for a declining unemployment rate. Win-win for everyone.”