Fool's Gold Report: Metals Rebound Despite Jobs Strength As Newmont, Barrick Lead Miners Higher

On Wednesday, positive economic data from the ADP private-sector jobs report might ordinarily have caused gold to continue its recent slide. But after the big hit that precious metals have taken lately, traders took a break from selling activity, and that helped push SPDR Gold Shares (GLD 0.60%) and iShares Silver Trust (SLV 0.64%) up around 0.7% each. Mining stocks did even better, as Barrick Gold (GOLD 3.39%) and Newmont Mining (NEM 12.46%) paced the sector's gains.

How metals moved today
June gold futures climbed almost $11 per ounce Wednesday to settle at $1,290.80, outpacing SPDR Gold Shares' percentage gains. Silver did even better on a percentage basis, with May silver futures picking up $0.36 per ounce to finish at $20.05, climbing above the key psychological $20 per ounce level and outperforming the iShares Silver Trust's daily performance. Platinum-group metals also followed their counterparts higher on the day.

Source: Kitco. As of market close.

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

The key that U.S. investors need to understand is that economic conditions look much different domestically than they do in much of the rest of the world. In Europe, deflationary concerns are weighing on commodities markets, as the EU has actually seen year-over-year declines in prices at the wholesale level. Similarly, many Asian economies are starting to see slowdowns, prompting central banks to consider new measures to try to create more economic growth. Still, the fact that the European Central Bank has been reluctant to act decisively toward even greater stimulus measures has likely held gold back from even bigger potential gains. And once bullion prices start advancing, investor interest in SPDR Gold Shares and iShares Silver Trust could well grow.

Meanwhile, in the mining sector, Barrick Gold and Newmont Mining gained 4% and almost 3.5% respectively. For Barrick Gold, the miner's decision to revamp its compensation structure evoked a great deal of commentary from analysts today, as some still think that executive pay has to fall much more dramatically in order to fit with the new reality in the precious-metals markets. Still, Barrick Gold's more important issue is figuring out how it wants to deal with its shuttered Pascua-Lama and other major prospects in the long run, especially with Barrick Gold still having so much debt on its balance sheet.

Newmont Mining's gains came after it closed on its new five-year term loan and extended the term of its existing corporate revolving credit facility by two years to March 2019. At a time of such uncertainty for gold prices, Newmont Mining's ability to refinance its debt is important for longer-term investors. As an alternative to more costly dilutive equity raising, shareholders have to be happy if Newmont Mining is able to take advantage of relatively good terms from the credit markets to meet its capital needs for the next five years.

Today's gold rise is a respite for beaten-down traders, but the bigger question is whether it can sustain these gains. In the long run, gold will rely on economic conditions not just in the U.S. but around the world in order to determine the supply and demand characteristics that will drive its price up or down.