Did A Great Jobs Report Just Ruin The Chances For Gold Stocks?
Strong Jobs Report Wows Investors
Last Friday’s US jobs report did a number on gold stocks…
According to the Bureau of Labor Statistics (BLS), US nonfarm payrolls advanced by 257,000 in January- much stronger than the 228,000 expected by analysts.
But the real shocker came from the revised data from late last year. The BLS upgraded December job gains from 252,000 to 329,000. What’s more, November gains were revised up to 423,000 from 353,000.
No doubt about it, the US labor market is heating up. November’s gains were the strongest month of private sector hiring since 1997.
While it’s great news for the US economy, it’s not so good for gold stocks…
Gold Stocks Take A Beating
Upon hearing the jobs report, investors sent gold stocks tumbling. Since the US economy appears to be holding up well in the face of overseas weakness, investors felt less inclined to stay invested in the industry.
The Market Vectors Gold Miners ETF (GDX) sank just over 4% last Friday. In case you’re unaware, GDX holds top-tier gold miners like Goldcorp (GG), Barrick Gold (ABX), and Newmont Mining (NEM).
Here’s a look at Friday’s drop…
As you can see, GDX reversed lower from multi-week highs near $23.00. The downturn put the gold miners ETF back into the lower range of a consolidation pattern (red lines) that has been building since mid-January.
Where do gold stocks go from here?
Given the strong US jobs report, it’s likely we see GDX fall back to the bottom of the consolidation range near $21.00 (bottom red line). If that level doesn’t hold, there’s a good chance we see GDX trade down to the next level of major technical support near $20.00 (green line).
Can GDX Fall Further?
Despite the strong US jobs report, there’s a very good chance the recent weakness in GDX will be short lived.
Why?
Look at a long-term chart and you’ll find GDX tested 6-year lows late last year…
With this key level of long-term technical support sitting just below the current market, downside is likely limited for gold miners. In a worst-case scenario, GDX may revisit the late 2014 lows near $17.00.
Of course, the health of GDX is closely linked to the price action in the gold market.
So if you’re looking for clues as to where gold stocks are going next, the gold market has the answers.
And as you’ll see in Wednesday’s article, the yellow metal is setting up for a very important technical test.
Be sure to tune in!
Until Next Time,
Justin Bennett
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.
Category: Gold, Precious Metals
