Gold and Silver Teeter Ahead of FOMC Minutes

Market conviction of a rate cut in December is fading, putting pressure on precious metals. Traders will look for insight on the Fed's policy views in the FOMC minutes and partial jobs data this week.

The Key Developments

• Silver retreats from a record high this week as gold comes under pressure from uncertainty over monetary policy.
• The Fed is seen as increasingly divided about the December rate decision, with markets now pricing in just a 40% chance of a cut.
• The focus is on FOMC minutes for clarity, as markets await delayed official economic data, with the September NFP now scheduled for Thursday.

FOMC Minutes in the Policy Debate

A month ago, markets were pricing in more than a 90% chance of a rate cut at the December Fed meeting, but those odds have since fallen to just over 40%. The reopening of the US government and the trade deal with China played a role, but traders are increasingly noting divisions among FOMC members. Some, such as newly appointed Stephen Miran, who voted for a 50bps cut last time, have stuck to their position that the economy needs lower rates. On the other hand, others have expressed concern about continued high inflation. Those include notably Governor Raphael Bostic, who said he was comfortable with the previous two cuts but was uncertain about a third. The lack of official data since September has made predicting the Fed's actions more difficult, as different officials speculate about the actual state of the economy. For this reason, clarification on their monetary policy stance in the minutes could be more crucial for the market and could significantly move the odds of a rate cut.

With the government reopening, some of the missing data will become available. However, it's not yet clear whether the Fed will have a full slate of economic figures when it sits down to decide policy by December 10th. Meanwhile, September NFP data will be available this Thursday, but the BLS has not confirmed if it will be able to produce inflation and jobs data for October. November data might be delayed until after the Fed meeting. In between, the ADP's weekly jobs figures will be published on Tuesday and are expected to show 11.3K jobs were lost in the first week of November.

Silver Bounced in November But Erased Most Gains

Gold prices initially rose in the wake of the US government reopening, but rising uncertainty about monetary policy easing left the yellow metal unable to make headway. Interestingly, silver spiked earlier in November, as if it were about to resume its summer trajectory, and even managed a new high last week. However, it has subsequently lost most of its gains as analysts caution that, given the strong correlation between the metals, gold will have to resume its upward track to support silver prices. And, without clear direction about what to expect from the Fed next month, gold and silver might trend sideways in the near term as delayed economic data is released.

Silver Reverses or Pulls Back After Double Top?

Silver peaked near $54.50 per ounce after failing to get past the October high, forming a double top and witnessing a subsequent drop to $49.50. Although the entire formation from peak to peak resembles a cup, the handle declined by over 50% of the cup’s height, rendering the chart pattern unlikely. The impulsive structure to the fresh bottom also suggests that another bearish leg may be due following short-term rallies, supported by a confirmed breakdown under the $50 handle. If weakness prevails, the next supports lie at the $47 and $45.50 swings, while extensions past $52 may bring the bull run back to life.

Source: SpreadEX | Sport Silver, 4-hour Chart