Bullish narrative for the metals market
Last Friday the monthly non-farm payrolls were released and they showed the US economy created only 235,000 new jobs in August, way below the expected 750,000. However, this helped traders to sell the USD. The unemployment rate slid (improved) to 5.2% from 5.4% previously, while average hourly earnings (wage growth) rose to 4.3% from 4.1% previously.
Weaker than expected Non-Farm Payroll (NFP) numbers have affected the sell-oof of the USD. But there is always a winner in all situations and in this case it’s gold and silver that are flourishing because of the weaker dollar. Gold jumped above 1,830 USD, and silver tested its 50-day moving average near 24.85 USD. It really looks like some bullish momentum has finally returned to these markets.
The Jackson Hole so much expected speech didn’t bring any news about changes in Feds plans. Powell didn’t even provide any details on when the Fed might taper its 120 billion USD Quantitative Easing (QA) program; he simply stated that the Fed plans to do it if the economy continues to strengthen – which, again, is what he has been saying for months now.
It looks like after the weakened NFP numbers for last month the investors are sure that the Fed is going to again delay its tapering decision. It was expected to happen in November, but now it seems like December it is, or with some analysts already calling for a 2022 start.
Therefore, gold surged, along with silver and other commodities. As a result, gold is on track to jump above the critical resistance of 1,835 USD, where the metal has already failed many times. Silver is staging a similar comeback, currently capped by the 50-day average at 24.85 USD. Once that is cleared, a powerful rally toward previous highs/ lows in the 25.60 USD zone is expected.
The current situation seems to be bullish for the metals market. The Fed will remain dovish as long as it can. Inflation is already raging in all parts of the economy. As a result, real yields continue to decline, supporting precious metals and sinking the USD.