Financial Market Fundamentals Are Weak

$USO, $OIL, $UNG, $GLD, $SLV, $PPLT, $BHI

Disappointing US employment report for September sent precious metals higher. While the decline in the USD on diminished speculations over Fed’s rate hike in October, heightened concerns over economic growth momentum also dampened risk appetite, promoting safe-haven demand on Gold and Silver coins.

Crude Oil market prices also strengthened on a weaker Buck.

The number of US NFPs added +142-K in September, sharply lower than consensus of a +203-K addition. The August increase was also revised sharply lower to 136-K from the initial estimate of 173-K.

Weakness was seen in both goods and services positions.

Goods producers cut -13-K jobs while the increase in services jobs was only+131-K. The unemployment rate was unchanged at 5.1%. The Southside surprise in the September payrolls report, together with the recent global economic uncertainty, will likely delay the US Fed’s beginning of a rate tightening cycle into Y 2016.

NYMEX Silver rebounded over +5% last Friday, resulting in a weekly rise of +1%. Market demand for Silver coins rose as the Devil’s metal has been hanging around the lowest marks in 6 years over the past months. Although the US Mint reported a -23% drop in sales in September, sales of 14.26-M oz in Q-3 were the highest on records going back to Y 1986. The US Mint started implementing weekly sales limits on its American Silver Eagle coins since July due to limited capacity. The measure was followed by the Canadian Mint after record monthly sales in July.

Sales of Perth Mint Silver Coins

In PGMs, Platinum extended recent selloff, culminating to monthly decline of -10% in September. The precious grey metal has been falling in 7 out of 9 months so far this year.

Palladium rose for a 4th week running, leading to a monthly market gainer of +8.2% in September. VW’s (OTCMKT:VLKAY) scandal has raised speculations that market demand for gasoline-fueled vehicles would increase and this should raise demand for Palladium in auto-catalyst application.

NYMEX Nat Gas fell for a 3rd straight week although headline US storage increased less than anticipated and the number of Gas rigs fell.

Mild weather across most of the US is expected to lower market demand for Nat Gas both for heating and cooling purposes. The DOE/EIA reported that Nat Gas inventory rose +98 bcf to 3 538 bcf in the week ended 25 September. Stocks were +454 bcf higher than the same frame last year and +152 bcf above the 5-yr average of 3 386 bcf.

Baker Hughes (NYSE:BHI) estimated that the number of Gas rigs decreased -2 units to 195 in the week ended 2 October. In terms of drilling types, directional rigs fell -3 units to 83, horizontal rigs fell -20 units to 609 and vertical rigs dropped -6 units to 117. The total number of rigs plunged -29 units to 809 during the week, mainly driven by the sharp -26 units decline in Oil rigs.

Have a terrific week.

HeffX-LTN

Paul Ebeling