Gold & Silver Market Analysis for Monday 4th October

Kinesis Macroeconomic Analysis

As the new week begins, the keyword describing market activity – “uncertainty” – remains the same. In fact, macroeconomic data from the US, as well as data indicating the beginning of tapering, still appears crucial. 

The ADP nonfarm payroll employment change made on Wednesday, and the official U.S. nonfarm payrolls that will be announced on Friday, will be highly important. It should be noted that the ADP National Employment Report is a monthly report of economic data that tracks levels of nonfarm private employment in the U.S. 

Additional solid macroeconomic data will increase the pressure on the Federal Reserve for a rapid beginning of the tapering process.

On the other hand, the numbers are below what was to be expected, which could leave more room for the Fed to postpone tapering – although, it does not appear likely at this stage. 

There are many other elements of uncertainty influencing the markets recently, which have resulted in the decline of stocks. Of course, tapering remains the focus, but investors are becoming more cautious after the Evergrande troubles – the Chinese estate giant which is now close to default.  

Moreover, energy prices are surging in all continents, with the WTI (West Texas Intermediate – a specific grade of crude oil) price approaching the psychological threshold of $80. Theoretically, a recovery of the oil price should be a positive element, but in this case, it seems to be a clear inflationary driver. Speaking of uncertainty and petrol, it seems impossible not to mention the UK, which is now facing a 10-day petrol supply crisis.

So, how do all these factors have an impact on gold? 

First of all, any sort of macroeconomic data that forces the Fed to be more cautious, with the beginning of tapering, could be a supportive driver for gold. In addition to this, it is important to remember the growing uncertainty that impacts the markets, which is generally a positive driver for the gold price.

Kinesis Money Gold Analysis

Currently, the gold price is holding above $1,750, with a fractional loss and little volatility.

It is clear that investors are “waiting it out”, with growing expectations for the US nonfarm payroll report that will be released on Friday. 

Further indication about the timing of the next decision from the Federal Reserve, may offer a further insight into the directionality of gold.

From a technical point of view, the fact that gold is holding above the support zone of $1,750 could be a positive sign. 

So far, bullion has not yet found the strength to continue its recovery which began last week, where it strongly rebounded from $1,725 to $1,760.

Kinesis Money Silver Analysis

The silver price has started the new week with a small retracement, losing 0.5%. This modest decline can be understood as a point of consolidation, after a 5% increase was witnessed in the latter part of the past week, where silver bounced back from $21.2, jumping to $22.5. 

As previously mentioned, the decline of the silver price seen in the last few months is making it a “cheap” option for investors starting to collect it, awaiting new recoveries.

Carlo Alberto De Casa is Market Analyst for Kinesis Money.

He also writes as a technical analyst for the Italian newspaper La Stampa.

Carlo Alberto provides regular commentary for UK outlets including the BBC, Telegraph, the Independent Bloomberg & Reuters. He is also a commentator for CNBC Italy. He worked for Bloomberg as their Equity Research Fundamental Analyst before joining brokerage ActivTrades in 2011 to specialize in currency markets and commodities. In 2014 he published a book on gold and the gold market, followed by a new updated edition in 2018.

This report is not an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance.