Gold pushed above a stubborn $1300 resistance level overnight, as the market continued to discount the strong economic data from last week. It was a bit surprising that the gold market didn't react more strongly to the US jobs data on Friday.
The headline payroll reading certainly lent strength to the dollar and reduced economic uncertainty, and yet June gold managed an inside-day range and a higher close. This adds credence to the idea that the spike low on Thursday could hold and that the market found some value down there.
One thing that may have helped gold avoid a steeper selloff on Friday was the fact that wage growth eased a bit from the previous month, suggesting that the Fed can afford to continue to be patient with the rate hikes. However, this does not answer the question as to why gold held firm in the face of the stronger dollar.
News that China increased its gold reserves for the fourth straight month in March to 60.62 million ounces, up from 60.26 million the previous month, seems to provide a steady demand source for gold, which can lend support even if the safe-haven influx has waned, and this factor was cited in the gains overnight.
A softer dollar may have lent some support overnight, even though the market appeared to ignore dollar gains on Friday.
The Commitments of Traders report for the week ending April 2nd showed managed money traders net sellers of 40,599 contracts of gold, reducing their net long to 39,158. This is down from a net long of 109,000 in mid-February. Non-commercial & non-reportable traders combined were net sellers of 45,995, reducing their net long to 124,153.
Silver also held up in the face of dollar strength on Friday, and perhaps it benefited from the strong economic data and higher equity prices, but overnight it was only moderately higher and unlike gold did not manage a breakout above the recent consolidation. Technically silver appears to be in a similar situation to gold, having rejected a new low for the move last week.
Managed money traders were net sellers of 14,040 contracts of silver last week, which moved them from a net long position to a net short of 1,779. Their net long peaked at 49,000 in early February. Non-commercial & non-reportable traders combined were net sellers of 13,302, reducing their net long to 33,920.
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