Gold Sideways, Silver Down Amid Hopeful U.S. Labor Report

 

Precious Metals Slip After Weak US Economic Data Report

(Bullion News Network) – Gold prices moved sideways to end the trading week on Friday, gaining just a couple of dollars to snap a three-day losing streak. The price of silver retreated further, challenging the $32/ozt support and losing $0.31 per troy ounce to secure its fourth consecutive loss. The lopsided price action drove the gold-silver ratio sharply higher; the GSR is set to close Friday up 1.17 points from Thursday at just under 101:1. Today’s lackluster metals performance coincides with an extended rally on Wall Street as traders continue to celebrate signs that U.S. President Donald Trump may be prepared to come to the negotiating table with China following a month of escalations in the ongoing US-China trade war. Today, Chinese officials claimed that the country is ‘evaluating’ offers from the U.S. government to begin negotiating on the issue with trade, welcome news for Wall Street traders concerned about how rising import costs will impact prices for American producers and consumers. 

A better-than-expected labor report is a more isolated cause for today’s stock market bump. U.S. nonfarm payrolls for the month of April exceeded the median forecast by over 40,000 jobs, clocking in at 177,000 compared to a projection of 133,000. The U.S. unemployment rate remained stable at 4.2%, in line with expectations from economists. This good news in the labor market comes on the heels of a troubling GDP report, published on Wednesday, which suggested that the U.S. economy could be slowing. Today’s jobs report helped take a chunk out of the uncertainty that has dominated Wall Street over the past couple of months. CNN’s Fear and Greed Index shifted to 43, the least ‘fearful’ reading since February 20th.

Likewise, the vibe reversal on Wall Street represents a structural hit to safe haven demand, according to CNN’s metrics. Safe haven demand, as expressed by the performance difference between stocks and bonds, soared this week from -1.68% to nearly 14%. It has been at least a year since stocks have outperformed bonds by such a large differential. Although it’s still unclear whether or not this drop in safe haven demand will translate in the precious metals market, today’s stock market surge to end the week may be taking at least some of the wind out of gold’s sails heading into next week. 

Looking forward into next week, traders will likely pay close attention to the Federal Open Market Committee (FOMC) meeting on Wednesday. Headed by Federal Reserve Chair Jerome Powell, this meeting will decide whether the Fed cuts interest rates. Given the optimistic labor and inflation readings markets saw this week, a ‘no-cut’ vote appears all but guaranteed. CME FedWatch projects only a 3.2% probability that the Fed will vote to cut rates by 25 basis points next Wednesday, down from 5.7% yesterday, 10.4% last week, and 10.6% one month ago. Despite the likely no-cut call, investors will tune in for Powell’s post-meeting press conference, scheduled for the same day at 2:30 PM. Powell, while notoriously cautious about driving market speculation in his speeches, may give traders some insight into how recent developments have impacted the Fed’s timeline for more rate cuts, which he has claimed are still on the way.

Both gold and silver will end the week down as major stock indexes secure another consecutive win. For both safe haven assets and stocks, next week’s FOMC meeting should prove eventful – even if the core numbers remain unchanged.