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Gold: When to Get Back In


The metal melts as the dollar rallies.

Some of that shine came off the yellow metal today, with gold dropping nearly 4% to below $1200 per ounce as the greenback went ga-ga following a better-than-expected jobs report.

After the run gold has enjoyed, even dedicated gold bulls this week were telling clients to hold off here, arguing that better entry points lie ahead for end-of-timers seeking out comfort in the ultimate fear hedge.

They may be dead-on right. A pullback is expected, seeing as how this trade has become as crowded as a Bruce Springsteen concert in dirty Jersey. But any pullback, say some pros, is a welcome sign for investors to move in given the long-term bullish case for the barbarous relic.

A quick recap: The Labor Department said the economy lost 11,000 jobs last month, much better than the 130,000 losses professional numbers crunchers had predicted. The unemployment rate fell to 10% from 10.2% in October. Economists had forecast the rate to stay unchanged.

But, for the sake of the contrarian cause, and to choke out some of this enthusiasm, we knew we could rely on the inimitable Joan McCullough of East Shore Partners. She didn't disappoint.

In her daily missive, she wrote to clients this morning that, after perusing the latest data, there were a couple niggling items that she felt curious enough to noodle on.

First of all, she wrote, the labor force dropped by 98,000 bodies which is helpful in reeling in the unemployment rate.

"Did they hit Power Ball or did they just walk off into the sunset, pack of Luckies and a couple o' Bud nips tied up in the bindle?" McCullough scribbled. "Take the visual."

The strategist added, "Hours came off the record low to 33.2. And wages added a penny an hour. Big whoop. The seasonally-adjusted labor force participation rate dropped 0.1 to 65. This is another recession low and nothing to crow about."

Finally, McCullough, like us, was a little weirded out by the revisions.

"The next thing that is odd is the SIZE of the October and September revisions, i.e., they added a combined 159,000 more bodies," she said. "That is far out, man, far out. As in: Are they for real?"

But, as for reaction to the report, investors drew their own conclusions: The dollar did a nice-sized jump and gold sold off.
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No positions in stocks mentioned.
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