After last week’s big sell-off in the metals, gold and silver are slowly creeping back upward.

The big catalyst ahead is the Fed’s first rate hike, probably next month, and disappointing jobs reports don’t seem likely to derail their schedule.

February 2, 2022

Dear Fellow Investor,

Gold bugs got a ray of hope this morning when the ADP jobs report came out with stunning numbers:

Instead of the expected 180,000 jobs created in the private sector in January, the report showed a loss of 301,000 jobs.

This was a remarkable reversal, and you can’t blame a gold bull for feeling that it would force the Fed to postpone their plan to begin raising interest rates next month.

But alas, the loss of jobs is almost entirely due to the rise of the Omicron variant...and with that wave already on the decline, the markets (and the Fed) quickly shook it off.

I expect a similarly negative nonfarm payrolls report on Friday, and a similar reaction to it by the markets.

Some Hope Ahead

Still, as you can see from this 30-day gold chart, the yellow metal has been posting a slow-but-steady recovery since last week’s big sell-off.

To that rebound in the chart above, you can add another $5 gain in the gold price today, giving us some breathing room above the $1,800 level.

Last week’s decline was largely related to month-end options expiry and the typical games that are played in the paper-gold futures market around that event. The futures don’t reflect the actual supply-demand dynamics for the metal in normal times, and they especially don’t when traders are creating millions of ounces of ghostly gold via keystrokes to force the price lower.

Still, that’s the way the global price is set, and we have to live with it for now.

We do have something to look forward to, however, and that’s the actual Fed rate hikes — the very event that traders are using to short gold right now.

The record shows that the shorts abandon their trade once the anticipated event occurs — they sell the news — and this releases the pressure on the metals. If history plays out as before, the beginning of the Fed’s rate-hike campaign will mark the start of a metals rally.

It’s only a few weeks away at this point, and I’m confident it will be worth the wait.

In the meantime, I’m talking with lots of junior mining companies with big exploration plans for the next few months. A rally in gold, silver and copper will certainly help their shareholders, but some of these companies are positioned to make big advances regardless of what the metals do.

Make sure you’re subscribed to Gold Newsletter to get my latest recommendations and on-going coverage of these exciting juniors.

All the best,

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