Top Stories This Week: Gold Hurt by Jobs Data, Needs Loss of Confidence in Fed

The gold price spent some time above the US$1,830 per ounce level midway through the week, but the yellow metal gave up its gains as the period progressed.

By Thursday (August 5) it was just above the US$1,800 mark, waiting for US jobs data.

Released on Friday (August 6), the report from the US Bureau of Labor Statistics shows that the American economy added 943,000 jobs in July, with the unemployment rate falling to 5.4 percent.

The increase in jobs was the biggest since last August, and came in ahead of the 870,000 expected by economists. Meanwhile, the unemployment rate is now at a pandemic low point.

Gold reacted poorly to the news, falling about US$40 to trade just under US$1,760 as of 1:00 p.m. EDT on Friday. The yellow metal is generally more compelling when the economy is less successful.

While Friday’s jobs data hurt the gold price, inflation remains an important potential tailwind. I had the chance to speak this week with Will Rhind of GraniteShares, who believes inflation is probably the key question when it comes to gold right now — however, he added, the overall market isn’t worried about it, and as a result hedges like gold are facing downward pressure.

“The market at the moment isn’t worried about inflation, and that’s why you’re getting stock prices at all-time highs, and that’s why the gold price and other sort of inflation hedges are not exploding to the upside” — Will Rhind, GraniteShares

For Will, a gold breakout will require a loss of confidence in the US Federal Reserve’s narrative that inflation will be transitory. Stay tuned for his interview, which we’ll be publishing next week.

Brian Leni of Junior Stock Review also shared his thoughts on gold with me this week, saying that although he has a bullish outlook on the precious metal, he tries to focus less on commodity prices and more on the price-to-value ratio — in other words, if he can find a company that’s selling for less than he believes it’s worth, he’s not particularly concerned about what commodity it’s focused on.

Brian also broke down the pros and cons of investing in gold juniors vs. producers, and with that in mind we asked our Twitter followers where they see the most opportunity right now: gold juniors, developers or producers. With over 50 percent of the vote, the juniors took the top spot.

We’ll be asking another question on Twitter next week, so make sure to follow us @INN_Resource or follow me @Charlotte_McL to share your thoughts.

Aside from that, INN’s Priscila Barrera looked this week at the battery metals sector, which continues to attract attention as the popularity of electric vehicles (EVs) increases. US-based Tesla (NASDAQ:TSLA) is one company leading the EV charge and it has big ambitions for domestic sourcing — but is the North American supply chain for EV raw materials in good shape? Experts say it could be better.

The governments of the US and Canada have made moves to build out their EV supply chains, especially now that Joe Biden is president, but Andrew Miller of Benchmark Mineral Intelligence said that despite exploration efforts, raw materials are still a big question mark.

“The economics of some of these (battery) facilities rely on having some element of access to raw materials, number one, but a sustainable source of those raw materials to develop those assets over time too” — Andrew Miller, Benchmark Mineral Intelligence

The US has indicated that it wants to work with allies like Canada and Australia to secure the raw materials it needs for EVs, and in general the experts INN spoke to believe that this will be possible.

“Asia might have more know-how now, but there are countless people working on advancing raw material extraction and battery technology in North America as there are elsewhere.” — William Adams, Fastmarkets

But the fact remains that China is leading the EV game for now, and North America will need to get to work if it wants to catch up and bring its auto industry into the 21st century.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.