Both gold and silver have suffered significant damage to technical charts in trading today

Immediately after the release of the US Department of Labor’s Non-Farm Payroll Employment Report, we saw gold and silver soar sharply. Early estimates from economists polled by Dow Jones predicted July’s additional jobs would total more than 800,000 people. While the vast majority believed we would see a significant increase in the number of new jobs added last month, many analysts took the opposite approach, believing the actual numbers to be well below expectations. Undoubtedly, the majority of economists surveyed by Dow Jones were correct in their forecasts.

The net result of today’s massive sell-off took the price of gold to the worst daily weekly decline in the past seven weeks. Helped by the strength of the dollar and the 10-year US Treasury. Today’s extremely strong employment reporting month has certainly reduced demand for precious metals and safe haven assets as a whole.

Gold prices had seen a slow and methodical decline, although trading in a narrow range, it undoubtedly had a bearish bias. Today’s action has beaten even the lukewarm declines seen this week for both gold and silver. The US Department of Labor said the new jobs created in July showed an economic recovery with 943,000 additional non-farm jobs added last month. This turned out to be well above expectations as analysts predicted 845,000 jobs would be the total number of jobs added last month. Economists also called for the unemployment rate to drop from 5.9% to around 5.7%. Economists underestimated the actual number indicating that the unemployment rate had fallen to 5.4%.

With a solid indication that the US economy is improving dramatically even though there are major issues such as a recent increase in the Delta variant of the Covid-19 virus that has plagued some states across the country. This, coupled with recent inflationary surges, could also be very favorable to the precious metal, with one major caveat that the Federal Reserve is not 100% correct in believing that the vast majority of these recent inflationary pressures are transient. and will subside over time. While it makes sense to understand that supply chain bottlenecks and many companies do not have the staff to fully operate their businesses, there are things like energy and, to a large extent measure, food costs that could almost certainly last longer than the Federal Reserve expects. In an interview with Kitco News Anna Golubova, RJO Futures Senior Commodity Broker Daniel Pavilonis said, “This figure is bullish for the US dollar and pushing rates higher, which has the opposite reaction for
gold.”

This will certainly cause many precious metals analysts to rethink their current valuation and models for the future price of gold. If the next jobs report is as strong as July’s, we can expect real potential for the Federal Reserve to revamp and change not only its cut schedule, but its rate normalization schedule as well. interest.

However, this could have an unexpected effect. If the Federal Reserve starts to cut much sooner than expected, and / or raises rates much faster than it recently stated, it could put dynamic pressure on US stocks, pushing them down and maybe even be the impetus that would provoke the main clues. would experience one of the first deep fixes in years. A correction occurs when an index or stock loses 10% of its value from most recent highs. This could create a new incentive for market participants to re-evaluate adding safe-haven assets to their portfolios in order to protect their capital.

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Wishing you, as always, good exchanges and good health,

Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a solicitation to effect an exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.


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