Gold and Silver Struggling Near Key Resistance Post NFP Jump

Talking Points

• Gold vaults above $1,300 following disappointing US jobs report
• Copper and Crude oil exposed to souring investor sentiment
• Silver fails to break key $20.00 level as downtrend remains intact

Gold and silver prices jumped after Friday’s critical US Non-Farm Payrolls report came in below expectations, which sent the US Dollar into a tailspin and weighed on copper and crude oil. A continued souring of risk-sentiment and weakness in the greenback would likely support further gains for the precious metals in the session ahead.

Jobs Data Tempers Fed Bets

The disappointing March US jobs reading was a clear catalyst for gold’s recovery back above the psychologically-significant $1,300 level on Friday. While the jobs added figure was an increase on the previous month, the unemployment rate remaining static at 6.7 percent has likely tempered bets for a more hawkish Fed, which in turn is bearish for the greenback.

Light Docket Turns Attention To Risk Trends

Whether gold can hang onto its recent gains likely hinges on sustained US Dollar weakness. The reserve currency continues to struggle alongside US 10 year yields as lukewarm domestic economic data bolsters expectations for ongoing highly accommodative Fed policy. The other driver for 10 year yields is of course risk-appetite, which is particularly noteworthy this week given the current vulnerability of investor sentiment, as exposed by Friday’s retreat in the S&P 500 off record-highs.

An absence of major economic news flow over the coming session may leave traders to question what could support risk-sensitive assets, which in turn could prompt further profit-taking. This may leave the growth-sensitive commodities like copper and WTI crude exposed to declines. However, there is also the potential Friday’s moves to be viewed as an over-reaction and for traders to shift back into the energy commodities and base metals space.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil’s consolidation has continued alongside a decline in volatility, and fading upside momentum (signaled by the Rate of Change indicator). A breakout from the triangle formation that has appeared on the daily looks imminent, which will help offer a technical bias for the commodity.

Crude Oil: Break of Consolidation Looks Imminent

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

A Morning Star candlestick pattern on the daily suggests a shift in the short-term trend for gold may be on the cards. However, at this stage the downtrend remains intact, as signaled by the 20 SMA and Rate of Change indicator. This leaves a bearish technical bias preferred with the bounce to the psychologically-significant $1,300 handle seen as an opportunity to enter new short positions with a target offered by the recent lows at $1,277. However, a daily close above the 23.6% Fib at $1,302.57 would likely open up an advance to $1,320.

Gold: Sellers Keep Gains Capped Near $1,300

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

Silver remains in a short-term downtrend as signaled by prices holding below their 20 SMA. However, the rate of change indicator is beginning to reflect waning downside momentum. Given the notable selling pressure remaining at the $20.00 level, shorts are preferred with a target offered by the $19.00 mark.

Silver: $20.00 Handle Caps Recovery

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

The short-term trend for copper has shifted to the upside as signaled by the 20 SMA and Rate of Change indicator. However, a Gravestone Doji suggests some hesitation amongst the bulls following a run at the $3.085 mark in recent trading. The correction back towards key support at $3.00 is seen as an opportunity to enter new long positions.

Copper: Bulls Keep Prices Above $3.00 Handle

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Market Analyst, FXCM Australia

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