(ABX) (CHK) (AG) | US Jobs Sends Commodities Shares Upward!

Barrick Gold Corp. (NYSE: ABX) | Chesapeake Energy Corporation (NYSE: CHK) | First Majestic Silver Corp (NYSE: AG)

Barrick Gold, Chesapeake Energy, and First Majestic Silver are all having a great trading session in the market today, and for a very good reason. Today, the US jobs report was released, and the data proved to be negative. As a result, commodities headed upward, and every one of these stocks is commodity-centric. Today, we’ll talk about what we saw from the US jobs report, what it had to do with these stocks, what we’re seeing in the market today, and what we can expect to see from ABX, CHK, and AG ahead. So, let’s get right to it…

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US Jobs Give ABX, CHK, And AG The Boost They Needed

As mentioned above, the United States jobs report was released early this morning. While the data was negative, it proved to be overwhelmingly positive for commodity-centric stocks like Barrick Gold, Chesapeake Energy, and First Majestic Silver. We’ll get into why a bit later. For now, let’s take a look at what we saw from the jobs report…

In the month of August, economists expected to see slowing jobs growth based on historic trends. However, the data that was released today was far worse than expected. During the month of August, the United States economy added 151,000 jobs. While that may seem like quite a bit, that number is actually relatively small. When the US economy is doing well, jobs growth is generally consistently above 200,000 jobs per month. However, even analysts thought that it would fall below this mark. They just didn’t think that growth would fall as far as 151,000. In fact, in the month of August, economists expected that the United States would add 170,000 jobs to its economy.

What This Has To Do With Commodity-Centric Stocks

At first glance, it may seem as though the United States jobs report and ABX, CHK, and AG have no connection at all. However, that notion couldn’t be further from the truth. At the end of the day, all of these stocks are highly dependent on price movements in the USD. That’s because gold, oil, and silver, the commodities these companies make their money from, are all priced using the USD. When the value of the currency rises, these commodities become more expensive around the world leading to declines in demand and, at the end of the day, declines in price. When the USD falls, commodities become less expensive around the world, leading to gains in demand and price. With that said, there are two big ways that the US jobs report helped to push these stocks up:

  • Economic Slowing Will Add Pressure To The USD – Because of the poor jobs report, we’re likely to see a bit of movement in the currency market. At the end of the day, currencies are only as strong as the economies they represent. So, this bad news will likely push the USD downward, causing ABX, CHK, and AG to realize gains.
  • Federal Funds Rate – Also, for some time, the Federal Reserve has been talking about increasing the Federal Funds rate. Because of the way the monetary system works around the world, this would ultimately lead to gains in the value of the USD. While economic conditions in the beginning of the year delayed these efforts, it started to seem as though a strong case for a September rate hike was building. However, with such poor jobs growth, that case is starting to fall apart. This means that we’re more likely to enjoy low rates for a bit longer – a great thing for Barrick Gold, Chesapeake Energy, and First Majestic Silver.

What We’re Seeing In The Market

Given everything mentioned above, it only makes sense that we’re seeing gains in the market today in all three of these stocks. Currently (12:54), ABX, CHK, and AG are trading at $18.14 per share, $6.64 per share, and $12.26 per share after gains of $0.34 per share (1.88%), $0.39 per share (6.32%), and $0.48 (4.03%), respectively.

What We Can Expect To See Moving Forward

The truth is that these stocks are very different. So, we can’t determine what we can expect to see ahead for all three of them in a basket. Nonetheless, here’s what I’m expecting to see:

  • ABX – In the case of Barrick Gold, I’m expecting to see relatively positive news ahead. While the price of gold has been threatened lately by the idea of a rate hike in September, that worry seems to be fading. On top of that, gold demand is known to increase in September, as India’s wedding season is just around the corner. This will likely lead to further gains in the price of ABX.
  • CHK – When it comes to Chesapeake Energy, my opinion isn’t quite as bearish. While oil is currently seeing upward movement as a result of the poor economic news out of the US, this movement isn’t likely to last long. While demand plays a big role, the main story surrounding oil at the moment is supply, and with supplies around the world continuing to grow, I’m expecting to see further declines in the price of the commodity ahead. At the end of the day, this will likely lead to further declines in CHK.
  • AG – Finally, in the case of First Majestic Silver, I find myself somewhere in the middle. Gold is likely headed up thanks to the wedding season in India, lifting some of that risk. However, in the case of silver, the movement is largely investor-fueled and based on economic and market movements. With that said, it looks like economic conditions will likely support further price growth. However, the upward trend on this one is likely to be met with volatility as positive economic reports are occasionally released.

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