Gold Technical Report: After the massive fall earlier, last week gold prices recorded a green candle everyday suggesting buoyancy in the market. Carrying the same trend forward this week, it has crossed over the main level of $1680, and now the medium-term trend points upwards. They may take some time to hover around and then convincingly cross 50 DMA near 1722 on daily charts. The short-term Stochastics Oscillator is at 80 and the RSI momentum is 55.
Silver Technical Report: After the massive fall last week, silver prices signaled to retrace. The prices are currently hovering around 200 PMA on weekly charts. However, if the prices break earlier bottom and major support at 17.60, it will change the medium-term trend into negative. On the upside, crossing of 200 DMA at 21.88 will change the main trend to positive. The Short term Stochastics Oscillator is at 77 and the RSI momentum is near 61.
Fundamental Report: The forecast for today’s jobs report according to FactSet is expected to show an increase of 250,000 jobs being added in September which would be down from the 315,000 new jobs added in the prior month. Bloomberg’s predictions are close, forecasting an additional 260,000 new jobs were added in September. The Wall Street Journal is expecting that Friday’s jobs report will show that an additional 275,000 new jobs were added last month. In other words, expectations are fairly aligned and in agreement. If these various forecasts are correct, it would represent the slowest month of job growth since December 2020. However, analysts and economists will focus on whether or not the labor market is showing signs of contracting as a positive indication. In other words, good news would be bad news for U.S. equities and gold. This is because slower growth in terms of jobs being added would help the Federal Reserve loosen its pace of rate hikes in its fight to bring down the 40-year high and inflation. This week’s ADP private sector jobs report showed that 208,000 additional jobs were added last month. These numbers came in above expectations and forecasts. If tomorrow’s jobs report comes in above estimates it will harden the Federal Reserve’s resolve to continue to raise rates at an extremely rapid pace. But the most important report that the Federal Reserve will use in their decision process about their monetary policy is next week’s CPI inflation report for September. It will provide clear-cut and undeniable evidence as to whether or not recent action by the Federal Reserve has begun to reduce inflationary pressures. Currently, the CPI inflation index is at 8.3% down 0.2% from the prior month’s 8.5%. However, the most recent data on the preferred inflation index of the Federal Reserve the PCE showed that inflation had a slight uptick from the previous month.
There is no denying that the global markets have entered an exciting new phase in monetary policy as central bankers across the world ramped up their fight against rapidly surging inflation. After being criticized for being slow to recognize inflation, the Federal Reserve and its central-banking peers have embarked on their most aggressive series of rate hikes since the 1980s. As a result, there’s really nothing historical you can point to for what’s going on in markets today – we are seeing multiple standard deviation moves across every asset class – presenting savvy traders with back-to-back money-making opportunities, almost daily. Aggressive moves specifically from the Fed in recent months have dramatically strengthened the dollar – raising concerns among leading Wall Street economists that the dollar will be the next asset bubble to burst. According to Morgan Stanley – “such U.S dollar strength has historically always ended in some kind of financial or economic crisis” and that’s the exact direction we are heading in again. In fact, it was against that strong dollar backdrop that the Bank of England was forced to revert back to unprecedented “Quantitative Easing” measures, to avert a full-blown global financial meltdown. With the Fed and ECB hiking aggressively into a weakening economy – the big question is who will be next to switch on their money printing machines and revert to quantitative easing again? The numerous speeches from Fed officials should keep market players well occupied ahead of the highly anticipated US jobs report on Friday. If hawks dominate the scene once again, this could fuel bets over more aggressive rate hikes by the Fed. Alternatively, any hint of more caution may stimulate speculation around the central bank adopting a softer stance on rates resulting in a weaker dollar. Given how markets remain highly sensitive to anything relating to rate hikes, Friday’s non-farm payrolls report could set the tone for markets this month. According to Bloomberg, the consensus is expecting job growth to slow from 315k in August to 250k in September. The unemployment rate is projected to remain at 3.7% while wage growth is seen hitting 0.3%. If the jobs data exceeds market expectations, this boosts the chances of the Fed firing another monetary bazooka in the form of a 75-basis point hike. Alternatively, a disappointing report may reduce the odds of another super-sized move, ultimately weakening the dollar while supporting equity and commodity bulls.