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TSX Venture Exchange and Gold

The Venture opened lower Friday as Gold plunged on a better-than-expected U.S. jobs report, but the inherent strength of the Venture was again evident by the end of the day as the Index finished the session with a loss of just under 1 point despite Gold’s $25 drop and a 3.2% decline in Silver.  For the week, the Venture added another 11 points to finish at 807, its first weekly close above 800 since October 2014.

The S&P 500 and NASDAQ both hit new record highs Friday as traders found encouragement in a seemingly robust U.S. jobs report for July (255,000 new jobs added).  The report, however is at odds with other data points, particularly the most recent U.S. GDP growth number, while goods producing sectors continue to struggle in terms of generating employment.  If this was such a hot economy, as the apparent jobs growth 3 months ahead of November’s elections would suggest, why would the Fed still be trembling at the prospect of raising interest rates a mere 1/4 percent?

Friday’s weakness in both Gold and Silver was a knee-jerk reaction to the jobs report but the Venture’s behavior tells us to “buy the dip” – find out why in today’s Week In Review And A Look Ahead…

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Gold has traded between $1,336 and $1,365 so far today…as of 8:30 am Pacific, bullion is down $22 an ounce at $1,338…Silver has slid 59 cents to $19.72…Copper is down a penny to $2.17…Crude Oil is 46 cents lower at $41.47 while the U.S. Dollar Index has jumped half a point to 96.28 on a better-than-expected jobs report…

This is like a re-run of last month – another blowout jobs number, so buy the dip in Gold!…amazingly, leading up to November’s elections, the Obama economy is now creating jobs faster than rabbits can make bunnies, while other indicators of the U.S. economy from sources other than the Labor Department aren’t so rosy…hmm…

Job creation crushed estimates in July as the economy supposedly added 255,000 positions, according to the Labor Department…the official unemployment rate (not the “real” unemployment rate which includes the unemployed, the under-employed and the discouraged) held steady at 4.9% while hourly wages increased by 8 cents or an annualized pace of 2.6%…get ready for more media hype again about the Fed raising rates soon with the U.S. economy “on fire!”, or so the liberal narrative will have the masses believe…professional and business services led the way in July’s jobs growth with 70,000 new positions, while health care rose 43,000 and Wall Street jobs increased by 18,000…leisure and hospitality continued to be a big contributor to job growth, adding 45,000 while government added 38,000 (or 15%) to the total (not good)…mining and logging took a hit (down another 7,000), manufacturing grew 9,000 while construction added 14,000…

June’s blowout number was even revised upward from 287,000 to 292,000!…

“As well as being a long way above the consensus forecast of a 180,000 gain, the strength of July’s employment report was unusually (our emphasis) broad-based,” said Paul Ashworth, chief U.S. economist at Capital Economics…

Record Inflows For Precious Metal ETP’s

The year 2016 has already topped the previous record for the amount of money flowing into exchange-traded products featuring precious metals, Barclays reported yesterday…the bank issued research on all commodity investments through the first 7 months of the year, reporting combined inflows of nearly $8 billion during the last 2 months, taking year-to-date inflows to $50.8 billion, the strongest January-July tally since 2009…this, along with price appreciation, have pushed assets under management for all commodities to a 13-month high of $235 billion, well up from $161 billion at the end of 2015…

India’s Gold Imports Remain Weak

India’s Gold imports fell for a 6th straight month in July as weak demand and record high discounts prompted banks and refineries to reduce overseas purchases of bullion.  “Rising supplies of scrap and smuggled Gold amid sluggish demand has been keeping the Indian market in deep discount,” according to Arindam Sarkar, Senior Vice-President at Axis Bank, India’s biggest bullion importing bank…Indian demand should improve later in the year – the December quarter usually accounts for about a third of the country’s Gold sales with the start of the wedding season as well as festivals like Dhanteras, when buying Gold is considered auspicious…

Goldman Gives Bearish Outlook on Copper

Of course they also gave a doomsday scenario for Gold entering this year, but a storm’s about to hit the global Copper market according to Goldman Sachs which forecasts that the price may slump nearly 20% from current levels to $1.80 per pound over the next 12 months as mine supply picks up, producers enjoy lower costs and demand growth softens…

“Company guidance and our estimates suggest that Copper is entering the eye of the supply storm,” analysts including Max Layton and Yubin Fu wrote today…

Copper has lagged gains seen in other raw materials so far this year, especially Zinc and Nickel, which have benefited from forecasts for global shortages…for Copper, there’s been solid growth in global mine supply in the first half and that trend is expected to pick up in the coming quarters, according to Goldman…

From a technical standpoint, Goldman’s forecast doesn’t jive with John’s charts but we’ll examine that in more detail next week…

Financial Engineering

U.S. corporations are once again on pace to raise more than a trillion dollars in new debt this year, and the Bank of England just added more fuel to the bond fire…the BOE is a big new buyer in an already hot corporate debt market, and its program announced yesterday combined with programs of other central banks puts downward pressure on global interest rates, even as the Federal Reserve hopes (against all odds) to tighten sometime later this year…very little corporate debt is going to cap ex – much of it is being used for M&A, share buybacks and dividend increases…the fact that U.S. corporations have decided to borrow money in order to fuel growth larger than that warranted by economic demand may cause some major problems down the road…August is usually a quiet month, but already $48.25 billion in investment grade debt has been issued in the U.S., making it the 5th biggest week of the year…so far in 2016, investment grade corporations have already issued more than $850 billion in debt according to Informa Global Markets…last year, they issued $1.25 trillion, topping the record $1.1 trillion in 2014…

In Today’s Morning Musings…

1. Secrets of the Snip revealed…

2. TSX chart helps confirm outlook and target area for Venture…

3. Daniel’s Den – exclamation points on the sad state of the economy and politics…

Plus more…click here to read the rest of today’s Morning Musings, and all BMR exclusive content, or login with your username and password.