The Jobs Report Outdoes Estimates Sparking a Rally in the Precious Metals

NFP and PMI Were Key Today

Yesterday’s strong price decline in gold could easily be a “one and done” price dip based on today’s strong gains following the release of the jobs report for December. The report revealed that the labor market finished 2022 on a strong note with December adding 223,000 new jobs. This was well above estimates which anticipated an additional 200,000 jobs were added last month.

Additionally, a report today by the Institute for Supply Management revealed its non-manufacturing PMI decreased from 56.5 in November to 49.6 last month. This was the first contraction month over month in more than 2 ½ years. Collectively these two reports could have a strong impact on the monetary policy of the Federal Reserve because they might lower the probability of a recession.

Equities and Precious Metals Rallied After Data

The report fueled strong rallies across the board in U.S. equities. The Dow gained 2.13%, the NASDAQ composite gained 2.56%, and the S&P 500 increased by 2.28%.

The entire precious metals complex closed sharply higher with palladium gaining 4.06%, and platinum gaining 3.29%. As of 4:20 PM EST gold futures basis the most active February contract is currently fixed at $1871.1 after factoring in today’s price advance of $30.50, or 1.66%. Silver futures gained 2.35% or $0.55 with the most active March contract now fixed at $23.97.

The vast majority (over 60%) of gold’s price gains today were directly attributable to dollar weakness. The U.S. dollar index lost 1.11% in value and is now fixed at 103.66. Gold’s gains of 1.65% were a combination of bullish sentiment by traders (one-third) and dollar weakness (two-thirds) making up today’s price increase in gold.

Support and Resistance Levels in Gold

The chart above is a daily Japanese candlestick chart of gold futures. Our technical studies indicate that current resistance occurs first at $1883. This is based on a recent top that occurred in the middle of June 2022. Above that, there is major resistance at $1910 based on a top achieved last May.

The recent tops that occur at $1824 (August 2022) and $1791 (November 2022) continue to be technical levels of support.

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Wishing you as always good trading,

Gary S. Wagner