Once Again, It’s All About Jobs and the Fed

Traders and investors witnessed a mixed bag in the precious metals markets today, with gold and platinum trading lower while silver and palladium posted gains. As of 330 Eastern Standard Time, gold futures are currently off by almost seven dollars on the day, with a net drawdown of just over a half of a percent at $1261.40. At the same time, silver futures are posting modest gains, up almost seven cents (+0.39) at $17.39.

The current round of profit taking in gold comes immediately following a breakout in pricing that occurred Friday of last week. The $10 gain exhibited in gold on Friday pushed the precious yellow metal’s price point above minor resistance at $1260. Although today’s low reached $1258, gold prices have recovered slightly and are trading just above last week’s resistance.

While profit taking seems to be the underlying motivation of today’s modest selloff in gold prices, market participants will have a multitude of events to analyze this week in regards to future pricing. On Friday, the Labor Department will release its U.S. employment report for May. Current estimates are forecasting 210,000 new nonfarm payrolls to have been added in May.

Market participants will also be listening intently for any information conveyed by Federal Reserve members this week. Although the next FOMC meeting is not scheduled till mid-June, analysts will monitor for indications of the future direction of interest rate hikes next month. Beginning today, Fed Governor Brainard will speak at the New York Association for Business Economics. This will be followed by other members speaking later in the week.

Although it is widely anticipated that a rate hike will be announced at next month’s meeting, it is the balance sheet reduction of the Fed’s assets that has garnered extensive attention. The extent of balance sheet liquidations, as well as a direct timetable of these events, has just begun to be laid out by Fed members. In the minutes released last month, market participants got their first real clues as to the structure of this asset liquidation.

The fact of the matter is the liquidation of balance sheet assets, which currently sit at $4.5 trillion, has the potential to move markets and change the status quo to a much greater extent than the anticipated rate hike next month.

Wishing you as always, good trading,