Jobs Data = Big Day for Gold & Silver

GOLD / SILVER

With the dollar adding to yesterday’s significant decline again this morning there is talk that the currency index has made a major trend reversal and that should be a major bullish force for gold and silver ahead. In addition to gains from strength in the dollar, gold, and silver both appear to be embracing the idea the Fed will pause in their June 16th FOMC meeting. Therefore, today’s monthly jobs data will be a major data point in the Fed’s calculus, with stronger-than-expected numbers likely to be negative to precious metals. Expectations for today’s US nonfarm payroll reading is for gain of 190,000 jobs with expectations calling for an uptick in the US unemployment rate. Taking the March nonfarm payroll reading out of the equation a 190,000-job gain would be the smallest gain since January 2021. In conclusion, if expectations are matched gold prices should add to this week’s gains. Unfortunately for the bull camp, both gold and silver the investment component of demand has shifted negative with ETF outflows dominating this week’s headlines with outflows from silver more extreme than in gold. While the view is subject to debate, market expectations for a US Fed rate hike on June 16th have been moderated this week by data showing an anemic US economy. However, traders should keep in mind that the Fed is primarily concerned with snuffing out inflation and this week has brought signs of moderating inflation from a lower labor cost index and from significant weakness in an ISM manufacturing price paid index reading.

PLATINUM / PALLADIUM

While the platinum market has started off with gains, the bull camp should be disappointed with the magnitude of the early rally today. However, yesterday total US vehicle sales for May fell by an annualized rate of 800,000 units despite several favorable metrics released on sales throughout the industry from other sources. The bull camp should be emboldened by signs of ongoing tight US car inventories and from positive US auto sales readings posted by foreign company owned US manufactured car companies. Even though the platinum market temporarily violated the $1,000 level yesterday after the market failed to hold that level on a close basis in the previous session, prices did manage to rebound thereby increasing the credibility of $1,000 as a potential consolidation low support zone. Unfortunately for the bull camp yesterday platinum ETFs holdings declined by 2075 ounces resulting in a single day decline in total holdings of 0.1%. In today’s action we suspect that the upside action will be limited without a big picture definitive risk on vibe flowing from signs of softening in the US jobs sector. While the palladium market managed to bounce off the Wednesday lows yesterday and the add-on gains this morning very minor, the charts project a feeble recovery attempt is in motion. Pushed into the market we favor the bear tilt but think fresh shorts are very risky.

COPPER

Clearly, the sharp range up move in copper this morning signals a vast improvement in sentiment toward global copper demand, but we assume that gains are being accentuated by stop loss buying from a very large net spec and fund short positioning. However, the demand view toward China was not helped by a minor increase in Shanghai copper warehouse stocks this week of 471 tons but the longs might be happy they avoided a larger inflow. On the other hand, other copper inventory measures inside China’s bonded zone declined by 13,000 metric tons this week and that measure might be considered a prompt measure of use of copper in China. Other internal headwinds for today’s rally include the Congo becoming the 2nd biggest copper exporter replacing Peru as that diversifies supply flow away from South America. In the end, the copper market this morning forged a higher high and a 15-day high and that leaves the technical condition of the market favorable to the bull camp.

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