Gold prices have started the week in a muted fashion following a mixed set of US employment data on Friday. The headline US nonfarm payrolls figure came in well below expectations at 210k versus 553k expected. Average hourly earnings were also below forecasts at 0.3% versus 0.4% expected.
However, while two of the critical readings missed, the unemployment rate was seen falling back to 4.2% from 4.6% prior, well below the 4.5% the market was looking for. Following the labor market readings, the US ISM services number for November was seen coming in well above expectations at 69.1, well above the 64.9 the market was looking for.
While there were some strong points in Friday's data, the overall tone is likely not strong enough to convince the market that the Fed will taper further in December. Given the new threat and uncertainty from Omicron, it seems reasonable to expect that the Fed will look to hold policy at current levels while assessing the new variant's impact. With this in mind, there is room for gold prices to rotate higher near term if we start to see USD weakening further.
Silver Outlook
Silver prices remain weak following the recent uptick in USD and the fall back in equities seen in response to news of the Omicron variant. Looking ahead, there are clear two-way risks for silver. Any further strengthening of the dollar and further weakness in equities will likely weigh on silver.
This might be fuelled by the upcoming US CPI report on Friday if further excessive price pressures are seen. On the other hand, if CPI misses and USD retreats, this would allow silver to rebound near term. More broadly, Omicron updates also need to be tracked as any deterioration in the news flow will be negative for silver near term.
Technical View
Gold prices are currently sitting just above the 1763.88 level and above a retest of the broken bear channel. With MACD and RSI both bearish, there are risks of a further break lower, opening the way for a test of 1700. However, while 1763.88 holds, 1826.71 is the initial upside target for bulls.
