Gold continues to consolidate around the $1200 level as the market looks ahead to tomorrow’s jobs report. The yellow metal has displayed good resilience in the face of recent dollar gains and sweepingly positive forecasts for the U.S. economy.
Median expectations for September nonfarm payrolls are +190k and the unemployment rate is expected to tick down to 3.8%. However, there are whispers of another print in excess of 200k.
FedSpeak this week has been resoundingly hawkish, laying the groundwork for an already widely anticipated rate hike in December. In a speech earlier in the week, Fed chair Powell said the U.S. economy had a “remarkably positive outlook.”
Philly Fed President Harker said a recession is “not in our forecast” and that he could support a December rate hike. Harker is nonvoter this year and next.
Chicago Fed President Evans said the path for future rate hikes is “as clear as you could write up.” Evans is a nonvoter this year, but a voter in 2019. He is also one of the more dovish members of the Fed.
The CME’s FedWatch tool puts the odds of another 25 bps rate hike at 80.1%. The prospects for a March hike have risen to 53% amid all the cheerleading.
Rates in general have been on the rise of late, with the 10-year yield reaching a 9-year high of 3.18%. The 10-year has gained 28 bps in the past month and 85 bps over the past year.
These gains have been a driving force behind the dollar’s advance this year. With Olli Rehn reminding us today that the ECB is not expected to raise rates until September of 2019, interest rate differentials will continue to favor Treasuries and the dollar for the foreseeable future.
The dollar index has retreated into yesterday’s range, having failed to sustain upticks above 96.00. Nonetheless, considerable credence has already been returned to the underlying uptrend in the greenback.
As I said, gold has been resilient of late, suggesting haven demand is counteracting the inverse correlation that has been evident most of the year. Gold can absolutely rise in tandem with the dollar.
Gold still needs to clear the recent series of highs at 1211.06/1212.23/1214.32 to return to corrective mode from the present consolidative phase. Such a move would shift focus to the 1234.76/1238.58 zone, where the 100-day MA corresponds closely with the 38.2% retracement level of this year’s decline.
The 20-day MA (1198.36 today) and the 9-day MA (1196.60 today) have offered support yesterday and today. A close below the latter would shift attention to Tuesday’s low at 1188.80.
Silver continues to trade within Tuesday’s range, having struggled to sustain gains above the 50-day MA (14.70 today) this week. Nonetheless, this market still looks like is has some additional upside potential with scope for tests above $15. Such a move would shift focus to the 15.47/49 level, where the 20-week moving average corresponds with the 100-day MA.
On the downside, I’m watching the 9-day MA (14.52 today) on a close basis. This corresponds closely with 38.2% retrace of the recent move at 14.55.
Dips in platinum continue to be viewed as buying opportunities, but it’s worth mentioning the potential double top at 839.19/836.80. It would take a breach of support at 804.50 to confirm that pattern.
A push through those recent highs would also result in a violation of the 100-day MA (837.58 today). That would clear the way for a challenge of 858.92 (38.2% retracement of the decline off the January high.
Palladium continues to consolidate the previous two-week of gains as it hugs the trendline. A rebound above 1068.37 (50% retrace of the recent setback) would return credence to the dominant uptrend. Scope remains for a near-term challenge of the 1139.62 peak from 15-Jan.
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