Market update: gold and silver struggling to push higher

US rate cut expectations are being pushed back further, after Friday’s forecast beating NFPs showed the US labor market in robust health. The first 25 bp cut is not fully priced-in until the December meeting although the November meeting is a live option. In total, 38 bp cuts are seen this year, suggesting that it is currently a coin toss between one of two moves.

US dollar jumps after NFPs thump expectations

Friday’s US Jobs report shocked the market and sent US treasury yields spinning higher and gold and silver sliding lower.

Later this week we have May consumer and producer inflation, while the latest FOMC meeting will see all policy settings left untouched. The FOMC press conference may give some clues as to the Fed’s current thinking, along with the latest Summary of Economic Projections (dot plot).

US treasury yields jumped late Friday with the rate-sensitive UST 2-year adding 15bp after the jobs data.

US treasury 2-year yield chart

Gold technical analysis

Gold is looking to push higher today but the move lacks conviction. The recent $170/oz. range ($2280/oz. - $2450/oz.) remains in place and resistance is unlikely to be tested in the near term. A break below support would see $2200/oz. come into play ahead of $2193/oz.

Gold daily price chart

Gold hits a one-month low

Retail trader data shows 69.35% of traders are net-long with the ratio of traders long to short at 2.26 to 1. The number of traders net-long is 4.98% higher than yesterday and 15.34% higher from last week, while the number of traders net-short is 3.94% higher than yesterday and 17.95% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggesting gold prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger gold-bearish contrarian trading bias.

Silver technical analysis

Silver has outperformed gold this year but fell more than 6% on Friday as longs bailed from the market. Silver is now testing an old level of support turned resistance around $29.80/oz. but is finding it difficult on its first attempt. There is minor support around the $28.75/oz. - $29.00/oz. zone ahead of a recent swing-low at $25.93/oz.

Silver daily price chart

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