Numbers, a Three-Dimensional Miss

Average Hourly Earnings m/m, Non-Farm Employment Change, Unemployment Rate, all in red, a rare occurrence. Average Hourly Earnings is the FED's single most watched gauge of wage driven inflation and a 0.1% signaled wage inflation engine effectively switching off.

For market this measure was enough to start talking about lower yields, weaker dollar and sending gold above 4250.

Act one:

Text book reaction: Gold surged, DXY gapped down, US 2 year Treasury yield fell and  S&P 500 rallied. market consensus. 

Act two:

About an hour and half later, a news report was released. Two things happened at once, first Brent crude snapped back in a V shape recovery, signature of a supply story, not a demand one. The back drop: the global diesel crunch. Trump: Europe has just agreed to release a massive amount of their heavily stocked Diesel Oil. The process will begin immediately. 

Second, a synchronized move: US 10 year treasury yield rally, Gold decline and S&P 500 shed. The precise time correlation is the finger print of a single event, An Energy Supply Shock.

But why this is a supply shock, because the diesel crisis is a refining crisis. scarcity of diesel has pushed crack spread (refiner's margin) to record levels and refiners are running flat out - which keeps crude demand elevated. Releasing reserves of the finished product dose not solve the bottleneck. Here you can see the Brent M15 chart:

The Liquidation of Leveraged Positions

If gold's slide had been a "flight to the dollar", the dollar index should have surged.

Compare the charts bellow and see what happened in NY session:

Gold's parabolic August rally built a short term bubble that needed an excuse to burst. Until overcrowded positions unwind and the bubble bursts, any news serves as a trigger for further selling.

The ratio of gold's move to the dollar's in the critical window was roughly  4.5 to 1. So where dose the money went?

The market spoke; money flowed into bonds.

The FED stands between two fires. The visibly cracking labor market and the diesel shock. That is why 2-year treasury could not even close lower on the worst jobs report in years.

Wishing you all success and blessings.

This is not financial advise always do your own research.