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A quiet start for the metals complex on Monday. On the back of the recent selling we’ve seen, this isn’t necessarily a bad thing. Bumper US jobs data looks to have put an end to the metals rally for now with gold price correcting more than 5% from YTD highs and silver falling back also. Last week, a raft of hawkish comments from members of the Fed, including Powell, added to the rally we saw in USD, putting further pressure on metals.

This week, the focus turns to US CPI tomorrow. In light of the strength seen in the labor market, traders are wary of an upside move in CPI with forecasts for a monthly spike to 0.5% from -0.2% prior. If such a move is seen, this will no doubt resharpen the focus on Fed expectations which became more hawkish again on the back of the recent strength in US jobs data. With the US economy clearly showing more resilience than expected, there is a fear that the Fed will push on with rates for longer than the market anticipates.

 An upside surprise this week will no doubt spark a fresh wave of USD buying, endorsing those of the Fed recently calling for the bank to continue to hike throughout the year. In this scenario, metals will likely come under fresh selling pressure, taking a further leg lower this week. However, should any downside surprise materialise in the numbers, metals look poised to gain as USD unwinds sharply, though this is the outside scenario for the release.
 

Technical Views

Gold

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The correction lower in gold has seen the market breaking down below the bull channel from last year’s lows. Price is currently testing support around the 1871.04 level and with momentum studies turned bearish, the marker looks vulnerable to a fresh move lower with 1791.63 the next big downside target for bears.

Silver

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As with gold, the correction lower from YTD highs has seen silver breaking down out of the bull channel from last year’s lows. Price is testing below support at the 22.3205 with momentum studies having turned bearish. While price holds below here the focus is on a further move lower down towards the 20.6398 level next.

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