Did you notice the Yo-Yo swing in both Gold and Silver between Thursday and Friday? Looking at the particulars of the ADP Payroll data released on Thursday indicating 978,000 jobs created sent the metals into a tumble while Friday’s big Nonfarm Payroll miss of 559,000 jobs sent metals screaming higher. Over the next 12-24 months, the jobs data will be the most critical catalyst for Gold and Silver to make a run for the highs.
The jobs data will play two very different but equally important roles for the next bull market in Gold, Silver, and Commodities. First, the demand for commodities is increasing while labor constraints are leading to supply shortages. The Fed continues to believe that this phenomenon is merely “transitory” and is willing to let inflation run above the 2% target for “a period of time” before raising rates. Our outlooks at Blue Line Futures indicate that CPI will run “red-hot” over the next two quarters resulting in the inflation narrative extending through December. That will create another underlying bid in Industrial Metals (i.e., Silver), Energies, Softs, Meats, and Grains, which already post incredible YTD results. Running down the YTD data Lumber +79%, Lean Hogs +72%, Gasoline +56%, Crude Oil +43%, Copper +28%, Soybeans +20%, Palladium +15%, Sugar +14%, Platinum +8%, and Silver +5%. I believe the best two opportunities remain at the bottom of the list in Platinum and Silver. We have notified our clients that it may be beneficial to add on corrections via futures contracts for the flexibility of buying and selling on dips and rallies. What about Gold? If you would like to learn more about the strategies we are implementing or learn more about technical analysis, we created a guide to provide you with all the steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.
Daily Gold Chart
Chart Source: CQG
The May 559,000 job increase in Nonfarm Payrolls showed a slight improvement over April, but we remain a far cry from getting back to “Pre-Pandemic” levels as the Fed so helplessly wants. Given the pace of the recovery, it would take more than a year to recover the 7.6 million job deficit. That slides expectations out of when the Fed would raise rates beyond a year, therefore, creating a synthetic floor below Gold. I will be watching for my clients who choose to be long Gold is the “Rate of Change” on job creation, trends in real-time job search data, and the termination of unemployment benefits. To further help you understand the quantitative analyses of the precious metals markets, we created a free “Gold Trends Macro Book,” which has been updated with silver slides. You can request yours here: Free Gold Trends Macro Book.
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Originally Posted on June 4, 2021 – Gold/Silver: Buying the Dip
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