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Friday, September 7, 2012

Barrick (ABX) (GG) (NEM) Jump on Stimulus Expectations

Gold giants Newmont Mining (NEM), Goldcorp (GG) and Barrick Gold (ABX) jumped on Friday after the August nonfarm payrolls report revealed a dismal month, with an anemic 96,000 jobs created, far below the 125,000 analysts were looking for.

Other commodities and related companies jumped as well, as it pointed towards the likelihood that Ben Bernanke and the Federal Reserve will institute another round of quantitative easing in hopes of jump starting the economy.

As for gold itself, on the Comex division of the New York Mercantile Exchange, the most active contract for December deliver jumped $34.90, or 2.1 percent, to settle at $1,740.50. The last time gold settled that high was on February 28.

If Bernanke does pull the stimulus trigger, when coupled with the potentially unlimited bond-buying program launched by the ECB, gold, silver, and other commodities will soar again in response.

But even if the Fed decides to wait till later in the year, it appears a floor has been placed under the market for now. The longer nothing else is down though, the shakier that floor will become.

Bernanke and the Fed probably only have one real shot left at making it appear they can do something to help the economy recover, so while it's probable there will be some type of stimulus offered next week, it's also possible the decision will be made to wait a little longer.

That would put some downward pressure on gold and silver, along with other commodities in the near term, but it probably won't take long to recover once investors realize it's only a matter of when, and not if, the stimulus will come.

Stocks on the other hand will get crushed if nothing is done be Bernanke.

Barrick Gold closed Friday at $40.16, gaining $1.16, or 3.0 percent. GoldCorp ended the session at $43.00, up $0.86, or 2.0 percent. Newmont Mining closed at $51.69, rising $.79, or 1.6 percent.

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