Metals Higher Following Mixed US Labour Report

It’s been a quiet start to the week for metals markets though both gold and silver are trading in the green over the European session so far on Monday. Friday’s US jobs report failed to deliver the USD upside that many were anticipating, creating some room for metals to rebound near term. The headline NFP number was seen far below expectations at 199k vs 426k expected. At that level, the number was also lower than the prior month’s 249k. Aside from the miss on the headline reading, the rest of the report was strong with the unemployment rate seen falling to fresh cycle lows at 3.9% and average hourly earnings rising back up to 0.6% on the month.

While some are keen to spin the jobs number as a sign of the tightness in the labour market now, given that the labour market is still quite a way off the pre-pandemic highs, the release has left USD in a stifled condition. Looking ahead this week, the main focus will be on US CPI due on Tuesday. A solid release will reignite the focus on USD, likely weighing on metals near term. However, should CPI undershoot expectations also, this will likely be a catalyst for near-term sales in USD, suggesting that markets had become too hawkish in their expectations. In this scenario, there is room for metals to advance over the week as March rate hike probabilities would no doubt come down a little.

Away from USD, the broader risk backdrop remains key to track. Equities markets are sitting lower against recent highs, reflecting the recent run up in central bank tightening expectations. While risk markets remain weak, metals are likely to continue to derive safe-haven support. Should equities continue lower near term, this is likely to remain broadly supportive for gold though silver might suffer a little as a result of the lack of demand from industrials.

Technical Views

Gold

Following the rejection at 1826.71 and the subsequent move back below the rising trend line from 2021 lows, gold has since found a bid and is now fighting to move higher. With both MACD and RSI bullish, the focus is on a break of the 182671 level and a continuation higher towards 1871.04 next.

Silver

For now, silver prices are sitting back on the 22.3105 level support. With price holding around the middle of the bearish channel and with MACD bearish, there are risks of a continuation lower here with a break of the 21.4523 level opening the way of for a move down to 19.5643 and the channel low. To the topside, bulls need to clear the 24.0073 mark (and channel high) to cause a shift in sentiment.