Summary:

• Gold and Silver both sold off on Friday following NFP
• Solid jobs data caused both metals to pull away from recent highs 
• Net long positioning in Gold surged by record amount last week

Both Gold and Silver sold off last Friday after the release of an all round solid NFP report and in closing lower on the week ended a sequence of three successive weekly gains. We noted some possible reversal signals in Silver prior to the US employment report and the number itself provided the catalyst for a sizable decline.

There has been a series of lower highs and lower lows in Silver since printing its 2017 peak in April. Last week’s high now seems to be the latest lower high and if price can break down below the minor swing support of 16.05 then a move towards the flush seen at the start of last month could be on the cards. 

 Silver appears to have printed a lower high last week. If the market falls below 16.05 then a further declines may well occur. Source: xStation

Due to being denominated in US dollars both Silver and Gold are sensitive to the fate of the greenback – hence their drop on the NFP release. They are also seen as safe haven assets to some extent and given the benign risk outlook presently being represented in equities than there is little to suggest that risk-off flows will support them in the foreseeable future.  

Gold hasn’t looked quite as weak as Silver in recent months but the latest COT report reveals an interesting development. The net long positions in the market have surged the most on record in the past couple of week as money managers have quickly become more bullish on the price of Gold. Last week the level rose back to 123,000 which is close to the average over the past year but the sharp increase in long positioning could mean that further declines will lead to stops being triggered and a fairly swift decline.Note how recent swings higher in the net positioning have been followed by declines in the price of Gold. 

 There was a sharp increase in net long positions in Gold last week. This could lead to an overcrowded trade and see a swift acceleration to declines should price fall. Source: Bloomberg

As for the technical outlook for Gold the post-NFP drop has caused price to fall through a rising trendline from the lows seen last July. Similar to Silver, there is a case to be made for some minor swing support (1254) just below the current price but if the market moves below here the further declines may well lie in store. Fib retracements from July low of 1204 could offer possible targets for short positions. The 38.2% and 61.8% retracement s are at 1247 and 1230 respectively. 

 Gold has fallen through a rising trendline from the July low of 1204. Fib retracements can be used for possible targets for shorts or potential support for traders looking to enter long. Source: xStation