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In my end-of-week piece written on Friday morning I noted that while we’d seen plenty of volatility, there might still be further fireworks to come with the NFP still ahead. Looking today at the action in the metals market, it’s safe to say we certainly got those fireworks. Gold prices were seen falling around 5% from last week’s YTD highs while silver prices were seen falling by almost 10%, having earlier printed fresh highs for the year.

The driver behind the sharp turn lower in gold and silver was the strong upside beat we saw in US data on Friday. The headline NFP printed 517k, more than double the 193k the market was looking for, while the unemployment rate was seen falling back to its lowest levels since the 1960s at 3.4%. These data points overshadowed a further fall in wage growth, which hit 0.3% from 0.4% prior, and has cast some strong doubt over whether the Fed will curtail its tightening campaign around summer, as had been forecast on the back of the FOMC.

Indeed, both metals had been higher on the back of the FOMC with traders eyeing the approaching end of the Fed’s tightening operation in line with Powell acknowledging that disinflation was in process in the US. However, with the Fed citing its desire to keep going with rates until inflation is back at target, Friday’s data suggests that Fed has more legroom than initially thought to press on with rate hikes a little longer. This week, the focus will be on a slew of Fed speakers (including chairman Powell), with traders keen to glean the Fed’s outlook on the back of that bumper jobs report.
 

Technical Views

Gold

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The reversal lower in gold has seen the market breaking down through the bull channel from last year’s lows and through the support at 1916.34. For now, gold is sitting on support at the 1871.04 level but with momentum studies having turned bearish, looks vulnerable to further losses towards the 1791.63 level.
 

Silver

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The retest of the underside of the broken bull channel saw silver prices reverse lower last week. Price is now sitting on support at the 22.3202 level and with momentum studies having turned bearish, the market looks vulnerable to further downside near-term with 20.6398 the next support level to watch on a break of the current lows. 

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