All that glitters isn’t always gold… :: InvestMacro

• Silver ↑ 33% since start of 2024

• 83% correlation with gold over past 5 years
  

• Supported by Fed cut & industrial demand
  

• Over past year US NFP triggered moves of ↑ 2.2% & ↓ 2.6%
  

• Bloomberg FX model – 70% – ($30.14 – $33.41)
  

The week ahead is stacked with key data and speeches by numerous policymakers!

But all eyes will be on the incoming US jobs report which could rock silver prices.

Monday, 30th September

• CN50: China Official & Caixin PMIs
• EU50: Germany CPI, ECB President Christine Lagarde speech
• JP225: Japan industrial production, retail sales
• ZAR: South Africa trade balance
• UK100: UK Q2 GDP (final)
• USDInd: Fed Chair Jerome speech

Tuesday, 1st October  

• EU50: Eurozone Manufacturing PMI, CPI, Germany Manufacturing PMI
• JP225: Japan unemployment, Tankan index, Manufacturing PMI
• UK100: S&P Global Manufacturing PMI
• US500: US job openings, ISM Manufacturing
• USDInd: Speeches by Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin and Boston Fed President Susan Collins
• US30: Nike earnings

Wednesday, 2nd October

• EU50: Eurozone unemployment
• US500: Speeches by Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman.
• UK100: BoE meeting minutes

Thursday, 3rd October

• AU200: Australia trade
• EU50: Eurozone Services PMI, PPI
• USDInd: US ISM services, initial jobless claims,
• RUS200 index: Speeches by Minneapolis Fed President Neel Kashkari, Atlanta Fed President Raphael Bostic.

Friday, 4th October

• SG20: Singapore retail sales
• XAGUSD: US September jobs report

Why cover silver when gold recently touched another all-time high?

Well, the white metal has been trending higher –  touching its highest level since 2012.

It has also outperformed gold on a week-to-date (wtd), month-to-date (mtd) and year-to-date (ytd) basis:

• XAGUSD: ↑ 1.9% wtd / 10% mtd / 33% ytd

• XAUUSD: ↑ 1.6% wtd / 6% mtd / 29% ytd

Investor appetite for precious metals jumped after the Federal Reserve cut interest rates for the first time in 4 years.

But silver is also drawing strength from the possibility of increased industrial use after China unleashed a wave of stimulus to revive its economy.

These fundamental forces point to further gains for silver which has moved in tandem with gold 83% of the time in any given 5-day period over the past 5 years.

Still, the incoming NFP report could shape the white metal’s outlook for October.

What are the market forecasts for the September NFP report?

• 140,000 jobs added in September (lower than the 142,000 added in August)

• Unemployment rate to remain unchanged at 4.2%

• Average hourly earnings to slip to 0.3% month-on-month (0.4% in August)

• Average hourly earnings to slip 3.7% year-on-year (3.8% in August)

Traders are currently pricing in a 49% probability of a 50 bp Fed cut by November with a 90% probability that 75 bp worth of cuts will be achieved by the end of 2024.

• Silver prices could push higher if a soft NFP report weakens the dollar and supports the case for deeper US rate cuts in Q4.

• A stronger-than-expected jobs report could weaken silver, especially if this results in a stronger dollar and reduced expectations over lower US rates.

It will be wise to keep a close eye on speeches by numerous Fed officials which may provide insight into future Fed moves – resulting in potential volatility for precious metals including silver.

Golden nugget: Over the past year, the US jobs report has triggered upside moves of as much as 2.2% or declines of 2.6% in a 6-hour window post-release.

 

Technical outlook:

Silver is trending higher on the daily charts with prices above the 50, 100 and 200-day SMA. However, the Relative Strength Index (RSI) is close to 70 – indicating that prices are near overbought territory.

• A solid breakout above $32.70 may open doors to the next level of interest at $34.00.

• Sustained weakness below $32.70 may encourage a decline toward $31.20 and $29.60 – where the 100-day SMA resides.

According to Bloomberg’s FX forecast model, there’s a 70% chance that XAGUSD will trade within the $30.14 – $33.41 range over the next one week.