Spot gold fell to a new 16-month low of 1204.52 in overseas trading before recovering somewhat on position squaring ahead of this morning’s U.S. jobs report. The yellow metal needs to close above 1222.32 to avert a fourth consecutive lower weekly close.
U.S. nonfarm payrolls rose 157k in July, below expectations of +190k. Solid upward back-month revisions (+35k to June and +24k to May) allow us to discount the headline number somewhat. The unemployment rate ticked back down to 3.9%, in line with expectations.
Hourly earnings rose 0.3%, in line with expectations. At +2.7% y/y, earnings continue to lag inflation, resulting in a decline to real earnings.
Further position squaring after the NFP miss and ahead of the weekend allowed gold to build on its intraday rebound. However, I’m not sure there is enough momentum to get a close above the 9-day MA (1221.50 today), let alone last week’s close at 1222.32. A fourth consecutive lower weekly close would leave gold vulnerable going into next week.
On the bright side, the breach of the 1211.72 low from 10-Jul-17 was not terribly convincing (just 20¢). A higher close will give us a simple reversal day (lower low, higher close) on the daily chart.
That’s probably not going to spook the holders of the huge net short spec position in COMEX gold futures. The point where they start experiencing some level of concern is probably somewhere north of $1260. We can consider that level out of play unless gold manages a close above the 20-day MA (1230.65 today).
For now, focus remains on the downside. A more convincing breach of 1204.72 would favor a challenge of the test of the 1194.88/1180.44 support zone (10-Mar-17 and 27-Jan-17 lows). An 11-handle may be what this market needs to spark bargain hunting in the physical market and the seasonal influence.
This morning’s job report was not materially off the mark enough to alter the Fed outlook. A rate hike in September is all-but a sure thing. However, there is suddenly a growing sense of uncertainty about the policy path after September.
“The path for policy is a lot more uncertain going forward then the policy getting here,” said Fed veteran Bill English in a MarketWatch piece on Thursday. A post at the PIMCO blog on Wednesday stated, “The interest rate outlook after September, however, is more uncertain.”
If doubts about a fourth rate hike in December continue to grow, so too will doubts about long dollar positions. This morning’s follow-through gains in the dollar index faltered ahead of the 95.52/65 highs and the DX has since retreated to trade lower on the day. If the greenback tops out, the precious metals will likely get that long-awaited tailwind.
Silver was unable to generate any downside follow-through today, leaving important short-term support at 15.17 (19-Jul low) protected. The subsequent recovery has silver trading ever-so-slightly-higher on the week. A close above 15.44 is needed to prevent a m eighth consecutive lower weekly close.
The 9-day MA comes in at 15.46 today. However, a close above the 20-day MA (15.60 today) is still needed to ease short-term pressure on the downside.
It might be a tad premature, but there is scope for a double bottom at 15.17/15.22. A move above 15.67 is needed to confirm this pattern.
Platinum is once again trading back above the 20-day MA. While recent volatility may suggest bottoming, I’m inclined to be skeptical until we see some sustained positive price action in gold.
Palladium is consolidating within yesterday’s range. The dominant trend remains negative, and while recent price action may be indicative of a bottoming attempt, we’ll look to gold here as well to confirm at least the short-term bias.
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