Unemployment Report Weighs on Gold and Silver

Published October 05, 2012

| Wall St. Cheat Sheet

On Friday, gold (NYSEARCA:GLD) futures for December delivery decreased $15.70 to settle at $1,780.80 per ounce. Silver (NYSEARCA:SLV) futures fell 53 cents to close at $34.57. Gold finished higher on the week, while silver ended unchanged.

Both precious metals traded lower on Friday after the unemployment rate in the United States came in better than expected. The Labor Department reported that the rate dropped to 7.8 percent, previously at 8.1 percent. It was the first time below 8 percent in 44 months, and below estimates of 8.2 percent.

However, investors should heed warning that the U-6 unemployment rate, which includes underemployed and discouraged workers, remained unchanged at a whopping 14.7 percent. Furthermore, the economy added only 114,000 new jobs, far below the level of a healthy economy.

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By the end of the trading day, the SPDR Gold Trust (NYSEARCA:GLD) finished 0.57 percent lower, while the iShares Silver Trust (NYSEARCA:SLV) fell 1.41 percent. Gold miners (NYSEARCA:GDX) such as Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM) edged 0.45 percent and 0.69 percent lower, respectively. Silver names such as Hecla Mining (NYSE:HL) and First Majestic Silver (NYSE:AG) both declined more than 1 percent.

Primero Mining (NYSE:PPP) shares surged 36 percent higher on Friday. The junior miner announced that it received a positive ruling from Mexican tax authorities in regards to how it reports silver revenues. The decision allows Primero to record silver revenue and taxes from its San Dimas gold mine at the realized silver price, as opposed to the spot price. This will lead to large savings as the company has a deal to sell silver to Silver Wheaton (NYSE:SLW) until August 2014 at a price for as little as about $4 per ounce.

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Disclosure: Long EXK, AG, HL, PHYS

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