Precious Metals Weekly Round-Up: Gold Falls After Strong US Jobs Report

Goldprices fellfrom their six-month high on Friday (January 4), following a report that showed strong gains in the US labor market last month.

The Bureau of Labor Statistics revealed 312,000 jobs were created in December, beating the expectation of job gains of around 179,000. Despite gold’s decline, the yellow metal is still poised to end the week in the green, thanks to lingering worries surrounding the global economy that have increased appetite for the metal.

“Gold is pausing for breath right now, with obvious potential for short-term profit-taking from speculative investors,” said Mitsubishi (TSE:8058) analyst Jonathan Butler.

“We have got to put it in the context of a rather impressive risk-off rally that we have seen since the middle of December, that led to gold going close to US$1,300,” he added.

In fact, the precious metal managed to break the US$1,300.00 in the previous session.

Looking forward, investors have turned their attention to the possible outcome of a discussion between US Federal Reserve Chair Jerome Powell and former Fed chairs Janet Yellen and Ben Bernanke for clues on if there will be any interest rate increases for 2019.

If interest rate hikes are halted, bullion will respond by becoming less expensive for investors to hold and thus increasing its appeal.

“A weaker dollar and low-risk environment are both proving to be very bullish factors for gold,” said Craig Erlam, senior market analyst at OANDA.

As of 9:20 a.m. EST, the yellow metal was trading at US$1,284.50 per ounce.

Meanwhile, silverremained steady following the report on US labor, finding its highest level since mid-June earlier in Friday’s session and then found a very small 0.06 percent as the morning continued. As of 10:00 a.m. EST, the white metal was sitting at US$15.57 per ounce.

Overall, the white metal has been boosted by a down US dollar, which has taken hits on the back of investor fears surrounding economic growth.

As for the other precious metals, platinum climbed almost 2 percent and as of 10:33 a.m. EST, trading at US$812.00 per ounce. For its part, palladium was up 2.79 percent and as of 10:37 a.m. EST, trading at US$1,283.00 per ounce.

Precious metals top news stories

Our top precious metals stories this week features gold experiencing its first annual decline in three years in 2018, Defiance Silver (TSXV:DEF) and ValOro Resources (TSXV:VRO) stocks climbing after announcing a “friendly merger” and the Tribune and Rand rejected East Kundana takeover efforts.

1. Gold Price Set for First Annual Decline in 3 Years

While the price of gold hit a six-month peak on Monday (December 31), the precious metal was also on track to enter into its first annual decline since 2015.

The yellow metal spent 2018 under the pressure of a steady US dollar, which sprung from geopolitical tensions, rising interest rates and a lack of investor interest.

“Gold started well in 2018, but a recovery in the US dollar weakened prices and uncertainty on the US-China trade front weakened the yuan, further pulling gold down,” said ABN AMRO’s Georgette Boele.

2. Defiance Silver and ValOro Climb on Friendly Merger

Defiance Silver announced on Friday (December 28) that it completed a “friendly merger” with ValOro Resources and following the news, both companies’ stocks climbed.

The deal was officially completed by on Monday (December 31), and the combined companies have continue on under the name Defiance Silver.

The miners see the merger as a unique opportunity to create a leading diversified explorer with an advanced portfolio of Mexican silver and gold projects.

We are pleased to complete the merger with ValOro and look forward with a shared common vision to unlock further exploration potential at the San Acacio silver project and Tepal gold project,” said Defiance President and CEO Peter Hawley.

3. Tribune and Rand Reject East Kundana Takeover Offers

An effort to acquire the 49 percent of the East Kundana joint venture it does not already own has gone south for Northern Star Resources (ASX:NST) after cash offers to Tribune Resources (ASX:TBR) and Rand Mining (ASX:RND) were both rejected.

The joint venture at the center of the situation, East Kundana, is an operational underground gold project located in Western Australia’s Eastern Goldfields region.

While Northern Star currently holds majority ownership of the project at 51 percent, Rand and Tribune hold the remaining interests in the project at 12.25 percent and 36.75 percent, respectively.

Also in the news

Also making news this week is a report from Bloomberg in which Mark Bristow, CEO of the new andrecently-listedBarrick Gold (TSX:ABX, NYSE:GOLD) claimed that this is just the beginning of a large shake-up in the gold industry.

Back in September, Barrick agreed to buy smaller rival Randgold Resources in a $5.4-billion deal. The merger created the world’s biggest gold miner.

“Without a doubt, this industry needs transformation,” Bristow said on Wednesday (January 2). “We believe we have started that. We’re going to end up with a blue-chip business and on the way we’re not going to be sitting on our hands should there be other opportunities.”

By combining the two yellow metal miners, Barrick revealed that it will run five of the 10 best gold mines in the world — which is great feat during a time when the industry had a very lackluster year.

“This industry, if it had carried on the way it was, [it] was going to become irrelevant,” noted Bristow. “The industry has “too few assets with too many management teams and it needs reorganization,” he concluded.

Since the Barrick-Randgold deal was announced, there has been much speculation that other companies, such as Newmont Mining (NYSE:NEM) and Goldcorp (TSX:G,NYSE:GG) may respond in a similar fashion, setting a true trend of more assets and less teams.

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