Gold has shrugged off this morning’s U.S. jobs report to maintain its consolidative stance near $1200. The yellow metal needs to close above 1192.16 to notch a higher close on the week.

U.S. nonfarm payrolls for September came in at +134k, well below market expectations of +190k. The headline miss was quickly dismissed as hurricane related. However, the more significant offsetting factor was the large upward revision to August payrolls from 201k to 270k.

The unemployment rate slid to 3.7%, below expectations of 3.8%, versus 3.9% in August. That’s the lowest jobless rate since 1969!

It is however worth noting that there are still a large number of eligible workers on the sidelines. The labor force participation rate remained steady at 62.7%, well below the 66% participation rate prior to the great-recession.

Average hourly earnings rose 0.3%, in line with expectations. Wage growth remains anemic, but the rise to 3.8% y/y reflects a positive trend that will likely heighten inflation concerns.

I don’t see the headline data as having much of an impact on the prevailing monetary policy trajectory. The CME’s FedWatch tool now puts the probability of a December rate hike at 81.7%.

In my opinion, the trade deficit was the more interesting report this morning: The U.S. trade deficit widened to -$53.2% bln in August, just outside expectations of -$53.0 bln. That’s the biggest deficit in nearly 6-month and close to the record -$55.0 bln deficit set in February.

Despite the ongoing trade war and the piling on of tariffs, our deficit with China grew by 4.7% in August to a record -$38.6 bln. If President Trump is truly trying to reduce our deficit with China, something clearly is not working. He may view these data as an excuse to further escalate the trade war.

That may increase haven interest in gold, even if the dollar resumes its uptrend. A stronger dollar puts more pressure on emerging, gold-centric economies and their currencies.

Gold still needs to clear the recent highs at 1211.06/1212.23/1214.32 to offer some encouragement to the bulls and the bottoming scenario. At this point, price action since the late-August corrective high was put in place, has the appearance of a continuation pattern within the downtrend that began in April.

A breach of the 1214.32 high would likely drag the 20-day moving average above the 50-day MA; something we haven’t seen since early-May. That would be a bullish technical event, favoring upside follow-through to test the 1233.80/1238.58 zone, where the 100-day MA corresponds closely with the 38.2% retracement level of this year’s decline.

A close below $1200 would be disappointing. A close below the 20-day MA (1198.40) and the 9-day MA (1196.27) would be more troubling.

Silver is trading modestly higher on the day, but appears poised to close lower for the week, after failing to sustain the rise to a 5-week high at 14.92. The failure to clear $15 and the inability to record a definitive close above the 50-day MA (14.68 today) leaves thme somewhat suspicious of the last several weeks of gains.

If silver can clear $15, I see initial potential to 15.45/47, where the 100-day MA corresponds with the 20-week MA. Initial support is at 14.55, where the 9-day MA corresponds with 38.2% retracement of the recent rise.

Platinum is defensive to end the week, but looks to end the week in positive territory. Recent gains have been capped by the 20-week MA ) 834.39 today) and the 100-day MA (836.90 today).

We’ve made note of the small potential double top at 839.19/836.80, but downticks have been limited thus far, leaving the confirmation point of this pattern well protected at 804.50.

Negation of that potential double top would also constitute a violation of the 100-day MA (836.90 today). Such a move would clear the way for a challenge of 858.92 (38.2% retracement of the decline off the January high.

Palladium has jumped convincingly back above its 9-day moving average. More than 61.8% of the recent corrective pullback has been retraced, returning considerable confidence to the dominant uptrend. A retest of the 1095.90 high from 28-Sep seems likely. Above that, the 1139.62 peak from 15-Jan is in play.


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