Gold and silver get shellacked on Friday after a blow-out jobs report, but the fundamental story for the metals remains intact.

February 6, 2023

Dear Fellow Investor,

Well, that was a helluva jobs number. And a helluva reaction in gold and silver.

The markets were set up for bad news last Friday, and eagerly awaiting it as the non-farm payrolls number for January was about to be released.

It was expected to come in at around 187,000 jobs, because that’s what the ADP number (106,000 private sector jobs) had indicated the day before.

Instead, the BLS’ payrolls number came in at a whopping 517,000 jobs created last month — a multiple of expectations that absolutely blindsided the markets.

Suddenly, the view that catapulted markets higher after last Wednesday’s Fed meeting — that Powell & Co. had only one more hike in them before they’d sit back and watch the lagging effects come in — was no longer the consensus.

It was replaced by a new thesis: That Fed would continue to beat away at the economy and the jobs market until they came to heel.

The reaction to the wildly positive jobs number was dramatic for a market that had actually wanted bad news: The stock market dove, Treasury yields and the Dollar Index jumped…and the metals were taken to the woodshed.

Gold plummeted nearly $50 and silver lost almost 5%, while the major mining stock indices dropped over 4%.

As I told MarketWatch on Friday “Gold is being hit this morning because the positive surprise on the jobs number is a strong indication that the Fed has more than a single rate hike left in it. Unfortunately for the bulls, it’s being hit harder than equities because it’s been outperforming stocks over the last few months. Profits are being taken by those who have enjoyed that ride.”

That’s what happened on Friday, but what about the future? Is this bull run over for gold?

I don’t think the BLS jobs report, if it is accurate, does more than simply delay our bullish thesis. We were expecting one more rate hike of a quarter-point in March, and then for the Fed to sit back and see what it had wrought with the most severe tightening campaign in many decades.

That is still a very realistic scenario, and if anything, the Fed is likely to cease hiking at some point over the next few months, for the many reasons I’ve already covered.

But what if the jobs report isn’t accurate? That’s basically what our friend Peter Boockvar said Friday on CNBC, countering the other guests that were simply parroting the Wall Street line.

Peter noted that every other indicator shows that the U.S. is already in recession. He cautioned that the jobs number came in so shockingly large because of seasonal adjustments.

Not only that, but if it was accurate, increased employment accompanied by decreased economic output means that productivity has plummeted. And that itself wouldn’t bode well for the economy going forward.

So there will be a reckoning in the days ahead as the data from many other sources confronts this jobs number.

We’ll see how it plays out, but I wanted to make sure that you knew my view: This gold run is not over, and the junior mining stocks we recommend are still buys.

Gold is rebounding just a bit today, up a couple of dollars while silver and the mining stocks have shed a bit more. That’s not encouraging, but neither is it surprising given the shellacking that we took on Friday.

In the meantime, I was able to uncover three new junior mining stocks to recommend on my trip last week to a couple of mining conferences in Vancouver.

These companies seem destined to rise in the weeks just ahead, regardless of what happens in gold and silver.

I just unveiled them to my Gold Newsletter subscribers in a special interim Alert. If you’re not already a subscriber, you can CLICK HERE to join now and get all the details.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference