Gold eases as NFP beat spurs risk appetite

OUTSIDE MARKET DEVELOPMENTS: GOP House leadership worked through the night to whip support for President Trump's signature "big, beautiful bill." House minority leader Hakeem Jeffries has been holding the floor for hours in an effort to delay the vote, suggesting the votes are indeed there.

President Trump claimed last night that the "Republican House Majority is UNITED." Passage of the 1BBB would be a huge win for him. Trump is keen to sign the bill into law on Independence Day.

June jobs data suggest that the U.S. labor market remains robust. Nonfarm payrolls rose 147k, beating expectations of 113k. The unemployment rate unexpectedly dropped to 4.1% from 4.3% in May.

The resilience of the jobs market is suggestive of the underlying strength of the broader U.S. economy. The rest of today's economic data was pretty good as well, keeping risk appetite underpinned.

Rate cut expectations were trimmed in reaction. The probability of a July cut plunged to 4.7% following the NFP report, from 23.8% on Wednesday. Fed funds futures continue to suggest potential for 50 bps in easing by year-end.

Trade optimism was bolstered after President Trump announced a trade deal with Vietnam on Wednesday. Additionally, the U.S. and India are reportedly sprinting to get a deal done ahead of the July 9 deadline.

Nonfarm Payrolls rose 147k in June, above expectations of 113k, versus a revised 144k in May (was 139k). The unemployment rate fell to 4.1% from 4.2%. Hourly earnings rose 0.2% on expectations of +0.3%, versus +0.4% in May. The workweek ticked down to 34.2 hours.

Initial Jobless Claims fell by 4k to 233k in the week ended 28-Jun, below expectations of 240k, versus a revised  237k in the previous week (was 236k). Continuing claims were steady at 1,964k in the 21-Jun week.

Trade Deficit widened to -$71.5 bln in May, in line with expectations, versus a revised -$60.3 bln in April (was -$61.6 bln).

S&P Global Services PMI was revised down to 50.9 for May, from a preliminary print of 53.1, versus 53.7 in April.

Services ISM rose 0.9 points to 50.8 in June, in line with expectations, versus 49.9 in May. Prices moderated to 67.5 from 68.7 in May.

Factory Orders surged 8.2% in May, just above expectations of +8.1%, versus a revised -3.9% in April (was -3.7%). 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$4.07 (-0.12%)
5-Day Change: +$4.83 (+0.15%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,352.28 - $3,495.89
Weighted Alpha: +39.22

Gold has retreated into the range after the NFP beat took a July rate cut off the table and spurred risk appetite. Yields and the dollar are higher, putting additional pressure on the yellow metal.



With the 1BBB seemingly on track for passage and heightened optimism on trade, risk-on sentiment seems likely to remain elevated into the week ahead. Diminished haven interest in gold may lead to renewed probes below $3,300, although the 50-day moving average is containing the downside thus far.

More substantial support is found at $3,256.02/51.28. The 100-day moving average will rise to the $3,200 zone next week, and provides an additional barrier ahead of the range low at $3,127.12.

Today's Asian high at $3,364.27 is now the important short-term resistance level. Penetration would put gold back above the 20-day MA and return confidence to the scenario that calls for renewed tests above $3,400. A breach of the 16-Jun high at $3,449.13 is needed to clear the way for a run at fresh record highs. 


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.351 (+0.96%)
5-Day Change: +$0.102 (+0.28%)
YTD Range: $28.565 - $37.288
52-Week Range: $26.524 - $37.288
Weighted Alpha: +23.54

Silver probed back above $37 in overseas trading, favoring a retest of important resistance at $37.288/430. The white metal is outperforming today on trade optimism and some belief that passage of the 1BBB will further stimulate the U.S. economy.



Penetration of $37.288/430 would put silver at 14-year highs and boost confidence in the $38.750 Fibonacci objective. Beyond that, $40 attracts.

A drop in the gold/silver ratio below 90 would bode well for a return to the 88 level. At that point, even if gold remains in the recent range, silver could reach $40.

The post-NFP intraday low at $36.474 now marks first support and protects the more important $36.367/362 level, where the 20-day MA corresponds with the low for the day. Congestive support around $36, stands in front of Monday's low at $35.610. The short-term range low at $35.369 looks well protected at this point.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.