While overnight infection counts were not shocking it does appear as if fears of very negative economic consequences inside China are beginning to escalate. In fact, the Chinese central bank has promised to take additional action again and have suggested their priority is to cushion the economy over control of their debt levels.
On one hand, the April gold contract has forged a 3 day high early and appears to be leaning in favor of the bull track, but ongoing new high for the move action in the dollar is probably limiting early gains.
We suspect that the focus of the gold trade will shift to the US nonfarm payroll results before shifting back toward the potential developments in China over the weekend in the afternoon trade.
Expectations for today's US nonfarm payroll reading call for a gain of around 160,000 and a reading at or above that level would likely cause some temporary selling of gold. However, there have been some analysts warning that the payroll reading today could come in softer than expected due to production changes at Boeing.
Overnight gold ETFs added to holdings for 12th straight session bringing net purchases this year to 1.65 million ounces. Silver ETFs also added to their holdings bringing this year's net purchases to 2.61 million ounces.
In the end, we give the bulls an edge with a critical pivot point at $1576 potentially setting the tone for the rest of the Friday trade.
Traders might consider being long gold and short silver as a strategy to play for renewed safe-haven buying, with the short's silver component possibly protecting the long gold position against any return to the deflationary/slowing physical demand environment from earlier in the week.
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Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Financial Services LLC, unless otherwise expressly noted.
