Gold and Silver continue attempting to base as a Tokyo holiday squashes Asian volatility ahead of tonights crucial U.S. employment data.
The aviation days of my youth featured some colourful sayings from the Air Force flight line. One of them being “try not to buy the farm today Office Cadet Halley.” This was a charming way of saying, don’t make a smoking hole in a farmers field with the government’s very expensive aeroplane, we have just signed you off in to do solo aerobatics. To this day I am not sure whether my instructor was more concerned about losing the aeroplane or me, but both Gold and Silver are attempting to avoid the same fate today. This time in the shape of the Non-Farm Payrolls where a good number could see dollar strength and result in gold and silver “buying the farm.”
Gold spiked to 1284.00 overnight as Jerome Powell was confirmed as the new Federal Reserve Chairman. The gains were short-lived though, and gold gave all of the gains back to close one dollar higher at 1276.00.
Nevertheless, gold has continued to make a series of higher lows on a daily basis as it has remained bid in Asia this week, driven by Chinese retail buying. With the Shanghai Gold Exchange arbitrage clearly at attractive levels on this interest, this has ensured that the price action in gold remains constructive from a technical perspective.
Gold closed at its 100-day moving average and initial support of 1276.00 in New York and had climbed $1.50 in early Asia trading to 1277.50, most likely on more Chinese retail buying interest. Below this, support appears at 1273.00 followed by 1263.50, the 200-day moving average at 1261.40 and then the critical 1260.00 level. This is also near to the 61.80 Fibonacci retracements with the converging of all these technical factors in one area underlining this region’s importance. Resistance is at the overnight high of 1284.00 followed by the double top at 1291.50.
Gold’s fate into the next week will be decided by the U.S. Non-Farm Payroll data tonight with the street expecting a monster 315,000 increase. Meeting expectations could see the dollar strengthen possibly nipping gold’s recovery in the bud. Conversely, a significant miss to the downside should be supportive of gold as the dollar weakens.
Silver continues to lead gold to the upside having traded more positively over the past couple of weeks. Overall it’s corrective sell-off has been much more shallow than golds. It has been attempting to base again in its long-term Fibonacci retracement box between the 38.2 and 50.0% levels whose boundaries are 16.9550 and 16.1750.
Overnight silver managed to consolidate further its gains from Wednesday, finishing unchanged at 17.0500. Today’s session has been somewhat moribund with Tokyo on holiday meaning that Silver remains almost unchanged at 17.0450. We expect volatility to pick up as the Non-Farm data draws nearer in the New York session.
Silver is flirting with its 200-day moving average and initial resistance at 17.1915 which is followed by a double top at 17.2950 and then October’s high of 17.4750. Nearby support is at yesterdays low of 17.0340. A break of this level implies a deeper correction to its 100-day moving average at 19.8700 and p[ossibly as far as the 16.6000 could be on the cards.