The Answer To The Future Of Gold Prices Could Signal Other Things For The Economy
June has been a rough month for gold. There’s no question about it. The shiny metal has dropped from May highs of $1,775.80 to a low in June of $1,671.70. This saw most major gold stocks drop considerably from their 2020 highs.
Look at the likes of Barrick Gold stock (GOLD Stock Report), Newmont (NEM Stock Report) and even gold streamers like Franco-Nevada (FNV Stock Report). All of them pulled back significantly from highs and back to a major technical level; the 50-Day Moving Average.
In looking at the overall picture of gold, the uptrend has still maintained its general support. The 50 DMA has acted as this level for over a year. Not counting the mid-March stock market sell-off, most gold stocks and the price of gold traditionally held trading levels above this point on the charts.
Will The U.S. Economy Trigger A Sell-Off In Stocks; Bottom In Gold?
While the Jobs data from last week triggered buying in stocks, the underlying concerns persist. Is the V recovery a real thing? Some are skeptical right now, which is one reason why gold stocks have started to trend higher this week. The Department of Labor’s Bureau of Labor Statistics indicated that 2.5 million jobs were added in May. This was followed by an exuberant take on how the United States may be turning things around.
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But here’s where it gets juicy and if you’re a trader, something you might want to keep tabs on. The footnotes of the numbers show that the jobs report may have been inaccurate for the last two months. The Bureau admitted that government household survey takers mistakenly counted about 4.9 million people as employed, although they were unemployed.
That’s not all either. If that were corrected, the unemployment rate would have risen to 16.1% in May. The corrected April figure would have been more than 19.5%—rather than 14.7%. Since the official response was that the government doesn’t correct its survey results, it’s tough to see mainstream discussions on the topic. The data doesn’t get corrected “for fear of the appearance of political manipulation”.
So, take that for what it’s worth but it could lead to “correct figures” later on. Mike Wolford, Director of Customer Success at Claro Workforce Analytics. “[The Bureau] looks incompetent or political. Twenty million people didn’t finish unemployment in the last 30 days. I would have thought lag time was an explanation because it’s a lot to count actually, but to find out they made a five-million-person error, knew about it, didn’t correct it for the sake of ‘data integrity’ when they literally update things all the time.”
Time To Start Watching Gold Stocks Again?
New Gold (NGD Stock Report) has been one of the few gold stocks to weather this storm. There’s no denying that the gold penny stock dropped to new 52-week lows in March. But since then, there hasn’t been much of a “correction” compared to the likes of Barrick Gold stock and others. In fact, since those. March lows, NGD stock has made new 2020 highs and bounced 241% as of this week’s $1.33 high.
Before the market opened on June 9, the company made its latest announcement. New Gold reportedly divested its Blackwater Project in British Columbia to Artemis Gold. The terms of the deal saw New Gold receive $190 million CAD in cash with a $50 million CAD portion payable 12 months from closing. It will also benefit from a gold stream on 8% gold produced from the project, initially. This reduces to 4% of gold production after 280k ounces of gold have been delivered.
Renaud Adams, CEO said, “We believe that surfacing value for Blackwater today, while retaining exposure to the project through a retained gold stream and an equity position in Artemis, allows the Company to transition to the next phase of our growth plan as we continue to reposition the Company for shareholder value creation.”
Similarly, Equinox Gold stock price (EQX Stock Report) has performed admirably since March. While it hasn’t reached new 2020 highs, the stock hasn’t corrected much at all. Current 2020 and 52-week highs sit at $10.30. This week EQX stock reached a high of $10.18 so far. This comes as the company recently announced that Neil Woodyer has retired from the Company’s Board of Directors to pursue other interests. Aside from that, Equinox Gold took in around $145 million after warrants were exercised in late-May.
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