Gold - is the sell-off over?

10 Jun

Precious metals were taking a bashing even before the release of Friday’s better-than-expected Non-Farm Payroll report. While other markets traded in narrow ranges ahead of the data, gold and silver sold off sharply. They plunged further after the numbers were released, as higher payrolls and an unexpected uptick in Average Hourly Earnings saw the US dollar and Treasury yields shoot up. There had been signs that the unexpectedly tight labour market, given the Fed’s aggressive increase in interest rates, was finally loosening up a bit. This in turn would give the Fed room to make two 25 basis-point rate cuts by year-end. But Friday’s data saw the CME’s FedWatch Tool (a measure of where the ‘real money’ is going) price out a second cut. Now investors expect just one 25 basis point cut this year, although they’re unsure whether this comes in September, or after the Presidential Election, in December. Gold and silver are firmer this morning. But whether this marks an end to the current sell-off, or merely a pause, remains uncertain.
Gold fell back below $2,300 on Friday, and remained there early on Monday. But it managed to push higher this afternoon. At the same time, the daily MACD has dipped below the neutral line. While momentum is still to the downside, it could be in the process of resetting, which would support prices going forward. This week should help clear up matters.