We saw some big moves in the markets following policy decision from a few major central banks, the OPEC+ meeting, and a handful of key economic data. Let’s hope for more of the same as we look ahead to the new week.
On Friday, the US jobs report for the month of October came in ahead of expectations, but not significantly so to alter the market’s view that the Fed will speed up the pace of tapering or bring forward rate hikes. As a result, US bond yields remained under pressure, along with their European peers, supporting lower-yielding and non-interest-bearing assets. Gold and silver rallied, while the Nasdaq 100 was on course to finish higher for the 10th consecutive daily, no less!
In the week ahead, central bank speeches will dominate the agenda, although we will also have some key data to look forward to, including US CPI, Australian employment report and UK GDP estimate – see the calendar below.
Sentiment is likely to remain positive in the early parts of the week. Investors are realising that major central banks are unwilling to be very aggressive in reducing monetary support or afraid of doing so, despite strong inflationary pressures. We saw the Bank of England doing the talking but failing to walk the walk as they refused to hike rates despite indicating previously that they were likely to do so. On top of this, dovish rhetoric from the European Central Bank continued. Furthermore, the Fed’s decision to taper by $15 billion was fully priced in, and presumably so too were the downside risks to gold and silver. If the metals were going to drop, they should have done so after the FOMC decision. Instead, they have rallied to new highs on the week and despite the stronger US jobs report (see below for more on silver).
Key economic data highlights
Monday
- Sentix Investor Confidence
- Speeches by Fed’s Powell and Evans
Tuesday
- German ZEW Economic Sentiment
- US PPI
- Speeches by ECB’s Lagarde, Fed’s Powell, BoE’s Bailey and BOC’s Macklem
Wednesday
- US and Chinese CPI estimates
- US Unemployment Claims and Crude Oil Inventories
Thursday
- Australian employment report
- UK Prelim quarterly GDP estimate, construction output and industrial production
- Bank holidays in US and Canada
Friday
- US JOLTS Job Openings, Prelim UoM Consumer Sentiment and Inflation Expectations
Can precious metals extend recovery?
Precious metals have been able to hold their own relatively well of late. With yields under pressure, I think gold and especially silver will break to the upside. Falling yields boost the attractiveness of non-interest-bearing metals as they reduce investors’ opportunity cost of holding them on a relative basis. Silver needs to break out of THIS bull flag pattern to trigger fresh technical buying above resistance at $24.00:
At the time of writing, it was still holding with the consolidation pattern. A breakout could target the $25.00 handle, with the 200-day average coming in at $25.40.
Source for all charts: ThinkMarkets and TradingView.com
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