Hurricane Irma is now among the top 4 strongest hurricanes on record, with winds clocked at over 185 mph. Our thoughts go out to everyone affected, and it’s definitely a bad one. Hurricane Andrew hasn’t been talked about in a while, now the memories are flooding back. In gold price news: this highly-potent natural disaster could have a vast effect on the metal.
One side effect from last week’s Hurricane Harvey in Texas was this morning’s jobs report, where initial jobless claims rose by 62,000 to 298,000. This makes sense as a lot of temporary workers and laborers simply don’t have a place to work right now.
Once insurance money starts flowing toward Texas, we would expect to see an influx of building trades-people. In years past, rebuilding drew a lot of talent toward affected areas. Here in upstate NY, the big hurricanes in the mid-1990s drew quite a few roofers, carpenters and other home builders down south, and many stayed. This led to a lack of supply in building talent, which drove up prices. Yes, the usual economic forces still work just fine, even in modern times.
Sometimes things don’t quite make sense though. We’re seeing reports Thursday morning that Hurricane Irma is the cause for a rise in gold. Your Gold Enthusiast isn’t buying that as the cause, as we’ve known about Irma for several days now and gold is basically going sideways. Yes, it’s sideways at the top of the current trading range, but international prices haven’t broken out above 1350 – yet.
Gold prices are much more likely to rise due to South Korea’s claim that North Korea is readying another missile launch for Saturday. A missile test would be much more likely to have an impact in gold price news. International strife — or geopolitical instability if we keep with conventional terms — can directly impact currency values, which of course directly impacts the price of metals.
The one mostly-direct way Hurricane Harvey and Hurricane Irma can affect the price of gold is if the US government has to kick in a lot of relief money. That increases the budget deficit, which decreases confidence in the dollar. And that is the recipe for a continued decline in the currency, which is touching new annual lows Thursday morning.
In gold price news, the metal is now squarely up against the top of the 1300-1350 trading range, defying those who expected a pullback. What we will watch for now is whether the Dollar will continue its drop. If it does, we can expect gold to keep heading up.
Signed, The Gold Enthusiast