Gold Down After Upbeat U.S. Jobs Data; Silver Suffers Overnight Flash Crash

(July 7, 2017 - by Jim Wyckoff)

Gold prices have moved moderately lower in the aftermath of a U.S. non-farm payrolls number that was a big miss to the upside. Gold initially pushed a bit higher right after the employment report, but those gains were short-lived. Gold prices had traded modestly lower overnight. Meantime, silver futures are solidly lower after getting hit by a strong downdraft and falling to a 15-month low Thursday evening. August Comex gold was last down $7.60 an ounce at $1,215.80. September Comex silver was last down $0.218 at $15.765 an ounce.

The Labor Department’s employment situation report for June showed the key non-farm payrolls number coming in at up 222,000. That number was forecast to come in at up around 175,000. However, the wag-growth component of the jobs report showed little upside movement, which some deemed as meaning the Federal Reserve could hold off on raising interest rates. Thursday’s precursor jobs data, the June ADP national employment report, showed a jobs number of up 158,000, which was a slight miss to the downside of market expectations.

It appears that gold and other markets have already factored into their present price structures a U.S. Federal Reserve that is on a path of tighter monetary policy. Rising bond market yields this week are one solid clue that world central banks are intent on tightening their monetary policies in the coming months. The upbeat U.S. jobs report only confirms those notions. Recent history shows that more hawkish world central banks are negative factors for the precious metals and other raw commodity markets.

In evening-hours (U.S. time) trading Thursday, silver futures prices showed a dramatic drop just after 7:00 p.m. eastern daylight time. Futures prices were trading at $16.14 just before the downdraft that took prices to a spike 15-month low of $15.54, basis September Comex futures. There was no fundamental news development that occurred at that specific time. It was likely a large sell order that hit the futures market during thin trading conditions. These so-called “flash crashes” that occur periodically are frustrating to traders caught on the wrong side of the downdraft. It also makes many market watchers question the viability of futures markets, which are supposed to create more liquidity and better price discovery.

The key “outside markets” early Friday morning see NYMEX crude oil futures lower and trading just below $45.00 a barrel. The oil market bears are in firm near-term technical control. Meantime, the U.S. dollar index is higher early today, following the upbeat U.S. jobs report. The greenback bears still have the firm overall near-term technical advantage.

Technically, August gold futures bears have the firm overall near-term technical advantage as prices are in a four-week-old downtrend on the daily bar chart. Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,250.00. Bears’ next near-term downside price breakout objective is closing prices below solid technical support at $1,200.00. First resistance is seen at Thursday’s high of $1,229.50 and then at $1,260.00. First support is seen at this week’s low of $1,216.50 and then at $1,210.00. Wyckoff’s Market Rating: 3.0

September silver bears have the solid overall near-term technical advantage as prices hit a 15-month low overnight. The next upside price breakout objective is closing futures prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $15.00. First resistance is seen at $16.00 and then at the overnight high of $16.14. Next support is seen at the overnight low of $15.54 and then at $15.25. Wyckoff’s Market Rating: 2.0.