"Really Good" Jobs Report Clobbers Oil, Foreign Currencies; Gold Down, Still Resilient

Pancake Quarry, White Pine, Nevada (click for larger view)

My latest Kitco News commentary:

Is Gold Still on a Slippery Slope? (Nov. 24, 2014)

*** Local Mining News ***

MIDWAY RECEIVES FIRST BANK FUNDS FOR PAN GOLD PROJECT (Press release, 12/1/2014)

*** AM Prices ***

The early morning prices used for today's analysis:

Goldman Sachs Commodity index (Enhanced)

S&PGSCIES 271.57 (267.52 52-wk low)

Nymex/Comex

Nymex oil (WTI) $65.78 per barrel
Comex copper $2.9110 per pound
Comex gold $1,195.3 per ounce
Comex silver $16.335 per ounce

Gas prices are expected to move lower:

Latest Nevada gasoline prices

Morning miners!

On the release of the monthly jobs numbers a CNBC contributing economist exclaimed, "A really good jobs number!" and "...the revisions are fantastic!" One might expect such praise from the White House with 312,000 jobs added in November against 230,000 expected and notable upward revisions for the previous two months. But no, these were the comments from American Enterprise Institute Senior Fellow Kevin Hassett, former economic adviser for Mitt Romney and Senator John McCain presidential campaigns and President George W. Bush in 2004.

It was a good jobs report from any perspective (full report below).

Despite what politicians may argue, the private sector is the force behind job creation posting a healthy 314,000 new positions last month. Unemployment remains at 5.8% but hourly wages are up and the 12-month average gain of nonfarm payrolls is a very respectable 224,000.  Although, some of today's gains account for early Christmas temporary jobs, it is still a strong showing with upward revisions for September of 271,000 up from 256,000; and August, 243,000 up from 214,000.

Oil is presently looking for any excuse to drop lower and it did on the positive news returning to $65 per barrel territory. The U.S dollar surged against the euro and yen, both posting new weakness with the euro dipping to 1.2271 and the yen cresting the key 120-level at 121.68. The DOW flirted with the mercurial 18,000 and the S&P 500 made a new intraday high at 2,079.47.

On a strong dollar and expectations that the Federal Reserve may now raise interest rates "sooner than later," gold fell below $1,200 for an intraday low of $1,186.4 per ounce . However, the lustrous one demonstrated much greater resilience than other key commodities (discussion below).

Poor mining stocks got another wallop. Big gold miners Newmont (NEM) and Barrick Gold (ABX) fell to $19.05 and $11.61 (chart below) . Midway (MDW) is $0.72 down 3.08% in morning trade. Benchmark Moly miner Thompson Creek (TC) and General Moly (GMO) are both feeling pain falling 3.97% and 7.27% respectively. GMO is now below 40 cents per share at $0.38. Timberline Resources (TLR) was the only miner in the green of those tracked by this report; up 4.98% at $0.63 per share.

Finally, benchmark miner and copper giant Freeport-McMoRan (FCX) dropped 1.17%. Freeport has recently taken on oil interests to diversify so is feeling double-pain when red metal and oil prices are down.

Mining Stocks, Yahoo Finance

Overall, an American economy gaining momentum with a strong currency behind it is good news and a lot better situation than our friends across the pond. European GDP growth has just been notched down to 1% from 2% for 2015 - keep the faith, pardner.

Look for my column on gold outlook for 2015 in the upcoming Winter Edition of the Mining Quarterly.

Here is my input to the Kitco News Weekly Gold Survey :

My vote: Sideways. Next week's target price, $1,190 per ounce.

Discussion: 

On the release of the monthly jobs numbers, a CNBC contributing economist exclaimed "A really good jobs number!" and "...the revisions are fantastic!" One might expect such praise from the White House with 312,000 jobs added in November against 230,000 expected and notable upward revisions for the previous two months. But no, these were the comments from American Enterprise Institute Senior Fellow Kevin Hassett, former economic adviser for Mitt Romney and Senator John McCain presidential campaigns and President George W. Bush in 2004. It was a good jobs report from any perspective.

On the news, U.S. bond yields rose and the U.S. dollar flexed even greater muscle against both euro and yen. Expectedly, gold dropped but with much less drama than Nymex oil which slumped to $65.17 per barrel. Importantly, on ounce of Comex gold at $1,195 now buys nearly 50% more barrels than at the end of 2013. Although fractionally down for the year in U.S. dollar terms, the value of gold in morning trading is up 16% versus copper and 18% relative to silver.

The yellow metal resilience relative to commodities should keep gold closer to the upper boundary of the "value wedge" as illustrated in the second chart: my target is $1,190 per ounce for next week. If lower oil prices lead to geopolitical instability (e.g., collapsing Russian economy), gold could rally significantly. Without additional catalyst, gold could fall with commodities to a range between $950 to $1,170 per ounce in the first quarter of next year.

Have a great weekend!

Cheers - Colonel

Headline photo by Mariana Titus