Non-Farm Payrolls on Friday

Fed Chair Powell tried to be hawkish at the FOMC meeting, saying that their goal of 2% inflation was still too far away and that he was not confident that monetary policy was sufficiently restrictive. But the market wasn’t buying it. They heard something different, they believe the Fed is done hiking. 

 To prove the point, the 10-Year yield fell 22 basis points to 4.72%, a huge move. The dollar also fell. 

Now we have Non-Farm Payrolls on Friday. Current expectations are for a decline from 336k jobs added in September to 188k in October, a drop of 44%. However, Payrolls data have a consistent record of significantly beating such estimates, so much so that the numbers have lost a lot of credibility. Should we see the same result again on Friday, I would expect bond yields and the dollar to rally initially and then, like on previous occasions, the markets completely reverse and then some. Gold and Silver would drop at first and then take off. A lower-than-expected number would be a complete surprise and the metals would go straight up imho.

In summary, I expect the metals to turn up on Friday, or Monday at the latest, but they could drop further first.

GOLD

Gold remains capped at 2010. A close above there would signal a test of the all-time highs next. But until then, we could see a drop to 1950-1975 first. This would ease the overbought situation Gold is in and create fuel for the breakout to the upside.

SILVER

Silver continues to struggle to make higher highs. Since the peak in May, it has been a litany of lower and lower highs. Key resistance remains at 24. A break there, would open up a test of the prior high of 25.43 next. If we get above that, then a test of 30 is possible. However, until 24 is broken, Silver also faces the risk of lower prices first, to 22.40 or 22.00.

GDX

The miners have been lagging the metals, dragged down by weakness in the stock market. GDX is still capped just above 30. Until we close above there, the risk remains down to 27.30, the 61.8% retracement of the rally from 25.62 to 30.16. It is also where wave C = A in size. 

However, ‘when’ we break above 30, I expect at least a test of the previous high at ~33 and possibly even ~36.

SUMMARY

The metals and miners continue to struggle in the short-term, but once these corrections are done, I expect to see a break of these immediate resistance levels and a U-turn in the trend to the upside, defined by higher lows and higher highs going forward.