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The metals market has started the week on a positive footing with both gold and silver seen firmly bid across the European open on Monday. The main driver behind the move is the shift lower in USD in response to data and events over recent days. On Friday, the latest set of US labor data was seen diluting the likelihood of a larger .5% hike from the Fed this month. While the NFP came in above forecasts, an unexpected uptick in the unemployment rate and weaker-than-forecast wages data were seen as providing an argument for the Fed sticking to a further, smaller .25% hike this month.

Along with the data, Fed expectations have also shifted materially in response to the unfolding SVB crisis. The sudden collapse of the bank at the end of last week has raised fresh concerns over the health of the US financial sector. With fears that other lenders might be close to collapse also, the market is expecting a less hawkish stance from the Fed. Indeed, we’ve heard some players such as Goldman suggesting that the Fed won’t hike at all this month as it monitors the situation around SVB.

Looking ahead this week, along with incoming news flow around SVB, tomorrow’s US CPI data will also be key for metals traders. CPI is forecast to have cooled last month which, if confirmed, should further strengthen the likelihood of a smaller Fed rate hike this month. In this scenario, USD should head further lower, allowing metals room to continue climbing.
 

Technical Views

Gold

The rally in gold prices off the bull channel lows has seen the market trading back up above the 1871.04 level. With momentum studies turned bullish, the focus is on a continuation higher while price holds above this level with 1973.51 the next upside marker to watch. To the downside, 1791.63 remains the key support level to note.

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Silver

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The sell off in silver has stalled for now ahead of a test of the 19.6131 level support. Price is now attempting to move back above the 20.6398 level. Momentum studies are starting to look more encouraging and if price can stay above this level, the focus will be on a move up to the 22.3205 level next. 

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