Gold and Miners Jump as Dollar Dumps

This morning’s dismal jobs report pushed Treasury prices sharply higher and bond yields lower. The 10-Year Treasury Note Yield plunges to the lowest level since August. Treasury bond prices saw the biggest gains, while investment grade corporate bonds also bounced. High yield bonds, which are highly correlated to stocks, are falling. Gold shares are also having a strong day on the back of a strong commodity. That’s being helped by lower rates and a weaker dollar. Stocks also opened lower on the jobs report.

Gold and gold miners benefit from falling bond yields today. Gold is a non-yielding asset. As a result, its appeal increases when bond yields fall. That’s especially true if the dollar is dropping as well (more on that shortly). Gold may also be benefiting from increased tensions in the Mideast. The daily bars on the first chart show the Gold SPDR (GLD) jumping the equivalent of $23 dollars today (+2.2%). Gold is recovering from a five-year low, and has a long way to go to reverse its major downtrend. The same is true of gold miners.


The second chart shows the Market Vectors Gold Miners ETF (GDX) climbing 6% today, making it the market’s strongest group. The GDX is moving above its 50-day average for the first time in five months. The GDX has been scraping bottom since August after falling to the lowest level in fifteen years. The fact that the group is so historically cheap may be attracting some attention. A weaker dollar is also helping.


The plunge in bond yields following the bad jobs report is also pushing the U.S. dollar lower. Chart 5 shows the PowerShares Dollar Bullish ETF (UUP) gapping lower today. It also remains below its moving average lines. Most foreign currencies are higher, with the biggest gains in the Euro and yen. A falling dollar is usually beneficial to gold and gold miners. So is a weaker stock market as we enter the volatile month of October.


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