At Last, the Gold Correction

As readers know, I have been waiting for a correction in gold since May. Finally, here it is. You should be thinking of buying, dear reader, not selling. For those who missed the chance to load up in February at lower levels, as I recommended at the time, this is your chance to get aboard. Maybe not quite yet but it’s close. The 200 day moving average tends to mark the bottom in gold bull market corrections and that number is just under $1260.

There is no change in gold’s fundamentals. This is just the market getting tired and stale longs throwing in the towel, in my opinion. The higher dollar is also a short term factor, largely due to a collapse in the yen.

What will bring back an upward bias back to the gold market? This Friday’s jobs number could do the trick. The markets may need another reminder of just how weak the U.S. economy is and how impossible it is for the Fed to normalize monetary policy. We could easily get that indication at the end of the week.

For those of you who actually care about the economy, here is the news we got this morning. For the second month in a row, the September ISM survey of New York Purchasing Managers reported a contraction in the headline number, printing 49.6 (below 50). That is a slight improvement from August’s 47.5, but the survey’s Employment index crashed from 54.9 to 33.9, its biggest one month drop ever, taking it back to its June 2009 low.

20161004_nyism

The chart is adjusted for expansion/contraction at the 0-x-axis representing 50.

That’s just a sample of the economic data we have been getting lately. I don’t think it supports a risk-on environment and a weaker gold price.