Gold prices have started the week in a muted fashion following a mixed set of US employment data on Friday. The headline US NFP figure came I well below expectations at 210k versus 553k expected. Average hourly earnings were also below forecasts at 0.3% versus 0.4% expected. However, while two of the key readings missed, the unemployment rate was seen falling back to 4.2% from 4.6% prior, well below the 4.5% the market was looking for. Following the labour market readings, the US ISM services number for November was seen coming in well above expectations at 69.1, well above the 64.9 the market was looking for.
While there were clearly some strong points in Friday’s data, the overall tone is likely not strong enough to convince the market that the Fed will taper further in December. Given the fresh threat and uncertainty from Omicron, it seems reasonable to expect that the Fed will look to hold policy at current levels while it assesses the impact of the new variant. With this in mind, there is room for gold prices to rotate higher near term if we start to see USD weakening further.
Silver prices remain weak following the recent uptick in USD and the fall back in equities seen in response to news of the Omicron variant. Looking ahead, there are clear two-way risks for silver. Any further strengthening of the Dollar and further weakness in equities will likely weigh on silver. This might be fuelled by the upcoming US CPI report on Friday if further excessive price pressures are seen. On the other hand, if CPI misses and USD retreats, this would allow silver to rebound near term. More broadly, Omicron updates also need to be tracked as any deterioration in the news flow will eb negative for silver near term.
Gold prices are currently sitting just above the 1763.88 level for now, and above a retest of the broken bear channel. With MACD and RSI both bearish, there are risks of a further break lower, opening the way for a test of 1700. However, while 1763.88 holds, 1826.71 is the initial upside target for bulls.
The breakdown in silver has seen the market breaking out of the rising channel from YTD lows. Price is now testing support at the 22.3205 support, however, with both MACD and RSI bearish, the focus is on a further break lower towards the 21.2174 level next.