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Fool's Gold Report: How Stocks and Gold Both Moved Higher Today

By Dan Caplinger – Feb 7, 2014 at 6:34PM

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It's been rare for markets to move in the same direction, but gold and stocks both jumped today. Find out why.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

With the stock market posting huge gains of more than 1%, most gold investors would have expected to suffer substantial losses. But this morning's dour employment report had the opposite effect, lifting stocks and gold in unison. Bullion ETFs traded higher, with SPDR Gold Shares (GLD 1.28%) climbing by three-quarters of a percent and the iShares Silver Trust (SLV 4.45%) gaining about half a percent.

Metal

Today's Spot Price and Change From Yesterday

Gold

$1,267, up $9

Silver

$20.04, up $0.09

Platinum

$1,381, up $10

Palladium

$709, down $1

Source: Kitco.

What moved gold today
News that U.S. nonfarm payrolls rose by only 113,000 in January was well below what most economists had expected to see, yet the underlying jobs data was somewhat mixed. In a rare occurrence lately, the labor participation rate rose even as the number of unemployed people fell, leading the unemployment rate to drop to 6.6%. That's just above the Federal Reserve's target for keeping its stimulative policies in place. The gold market, however, seemed to dismiss any possibility of the Fed accelerating its tapering activity to remove stimulus even more quickly than it already is.

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

Meanwhile, gains in industrial metals were somewhat muted, especially in light of the stock market's gains. Barclays said that, even though production from silver-specific mines would likely fall 4% to 6% during the next two years, overall supplies of silver would keep climbing this year and next. The key reason for the disparity is that many gold and copper miners still produce silver as a byproduct, with more than 70% of silver production coming from byproduct sales. Meanwhile, negotiations to end strikes in platinum mines in South Africa were suspended after parties failed to reach an agreement, suggesting that the dispute could last longer than some had expected.

Miners soaring
Even if gold's price gains were somewhat limited, gold miners soared, with the Market Vectors Gold Miners ETF (GDX 3.20%) jumping more than 3%. The combination of rising gold prices and support from the stock market gave the mining ETF an extra boost.

Even Newmont Mining (NEM 3.74%) and Freeport-McMoRan Copper & Gold (FCX 6.11%) managed to post solid gains of 2.5%, despite news from the Indonesian government that it will require miners to demonstrate their commitment to building in-country smelting facilities by paying money upfront to the government. Both Freeport and Newmont have had to stop exporting metal from Indonesia in light of government bans of ore exports, and they claim that building smelters in Indonesia wouldn't work from an economic standpoint. Clearly, investors believe that the mutual dependence between the mining companies and the Indonesian government will lead to a more palatable long-term solution eventually, or else Indonesia's posturing would have drawn a more dramatic response in their stock prices.

What's ahead?
Looking forward, China will begin to play a bigger role in the gold market now that its New Year's holidays are ending. In addition, Fed chair Janet Yellen will testify before the House Financial Services Committee for the first time since taking her role in leading the central bank. Her testimony will likely point the way toward the Fed's anticipated path in dealing with recent sluggishness in the economy.

Dan Caplinger owns shares of Freeport-McMoRan Copper & Gold. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Freeport-McMoRan Inc Stock Quote
Freeport-McMoRan Inc
FCX
$39.80 (6.11%) $2.29
iShares Silver Trust Stock Quote
iShares Silver Trust
SLV
$20.43 (4.45%) $0.87
Newmont Corporation Stock Quote
Newmont Corporation
NEM
$47.47 (3.74%) $1.71
SPDR Gold Trust Stock Quote
SPDR Gold Trust
GLD
$164.81 (1.28%) $2.08
Market Vectors Gold Miners ETF Stock Quote
Market Vectors Gold Miners ETF
GDX
$29.05 (3.20%) $0.90

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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