Double-Whammy Puts Strong Price Pressure On Gold, Silver

(June 7, 2024 - Jim Wyckoff)

Gold and silver prices are posting strong losses in early U.S. trading Friday, on a double-barrel hit from a strong U.S. jobs report and China’s central bank easing its gold purchases. August gold hit a four-week low and was last down $51.40 at $2,339.70. July silver was last down $1.207 at $30.15.

The just-released U.S. data point of the week, if not the month, saw the May employment situation report from the Labor Department and its key non-farm payrolls figure up 272,000. That’s well above the consensus forecast for up 190,000 and compares to the revised April report gain of 165,000 jobs. The May unemployment rate was 4.0% versus expectations for a reading of 3.9%.

The U.S. dollar rallied and U.S. Treasury yields rose sharply following the stronger jobs data. The jobs data falls squarely into the camp of the U.S. monetary policy hawks, who do not want to see U.S. interest rate cuts from the Federal Reserve.

Wednesday’s ADP national employment report for May was a miss to the downside on jobs growth. This week’s JOLTS and Challenger job-cuts reports also suggested a less robust U.S. labor force. So the marketplace was especially “wrong-footed” with this morning’s stronger Labor Department jobs report.

The second hit to gold and silver came on overnight news that China’s central bank did not add to its gold reserves in May. That really spooked the gold market bulls. “China has been buying for 18 months, supporting gold’s record rally to $2,450/oz last month. While China may be slowing, we anticipate ETF demand to return to the fore as U.S. Treasury yields fall, pushing safe-haven investors into bullion,” said broker SP Angel.

Asian and European stock indexes were mixed overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins.

In other overnight news, China’s May imports were reported up 1.8%, year-on-year, while its exports rose 7.6%. Exports were higher than expected but imports were less than expected.

The 1Q Euro zone GDP was up 0.3% from the fourth quarter of last year and was up 0.4%, year-on-year. Those numbers were right in line with market expectations.

The key outside markets today see the U.S. dollar index solidly higher. Nymex crude oil prices are modestly up and trading around $76.00 a barrel. The benchmark 10-year U.S. Treasury note yield is presently at 4.422%.

Other U.S. economic data due for release Friday includes monthly wholesale trade and consumer credit.

Technically, August gold bulls have the overall near-term technical advantage but faded today. Prices are scoring a bearish “outside day” down on the daily bar chart. Also, a bearish double-top reversal pattern has formed on the daily bar chart to suggest a near-term market top is in place. Bulls’ next upside price objective is to produce a close above solid resistance at today’s high of $2,406.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $2,308.70. First resistance is seen at $2,350.00 and then at $2,375.00. First support is seen at today’s low of $2,330.60 and then at $2,308.70. Wyckoff's Market Rating: 6.0.

July silver futures bulls have the overall near-term technical advantage. However, prices today are scoring a big and bearish “outside day” down. Also, a four-week-old uptrend on the daily bar chart has been negated to suggest a near-term market top is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at the May high of $32.75. The next downside price objective for the bears is closing prices below solid support at $29.00. First resistance is seen at $30.50 and then at $31.00. Next support is seen at the overnight low of $29.835 and then at this week’s low of $29.505. Wyckoff's