Silver Moves Ahead of US NFP, CPI

Silver is shy of a record high with the dollar weakening after the Fed's cut last week. Traders are looking forward to the final major data point of the year, which could set the market up for the next couple of weeks.

The Key Developments

● Silver backs off from an all-time high amid profit-taking ahead of key US data releases this week.

● Markets are looking to the first NFP since the government shutdown for guidance after the divided Fed suggested that further rate cuts would be difficult.

● US November inflation is expected to stay at 3.0%, above the Fed's 2.0% target.

US Jobs Market Back in Focus After Fed Cut

This week marks the first release of major official data since the US government reopened, with November inflation and jobs figures. Given the close proximity to the FOMC meeting, the immediate market impact may be somewhat muted. However, there is unusual division in the Fed, as evidenced by the uneven forecast from the dot-plot matrix and a large number of dissenting votes at the last meeting. This means data could carry greater weight as markets assess whether the deteriorating labour market will outweigh the still-high inflation rate. The Fed cut rates over concerns about the jobs market but warned that further easing might be difficult. In the wake of last week's mixed weekly jobless numbers, which saw new claims rise to the highest level in four and a half years, while the number of continuing claims fell to April lows. Investors will be keen to see if the latest report is an outlier or a sign of accelerating labour weakness, which could prompt the Fed to ease sooner.

The BLS will release a partial October NFP figure on Tuesday, at the same time as the number markets will likely be most interested in: November NFP is expected to decline to 35K, compared with the last reported number of 119K in September. This contrasts with the ADP's 32K loss for November, which the market had been using for reference during the government shutdown. The unemployment rate is expected to remain unchanged at 4.4%, up from 4.3% last reported in September. Then, on Thursday, the US November CPI is released, with an expected reading of 3.0%, unchanged from September's reading. Similarly, the core rate is expected to remain unchanged at 3.0% from September.

Silver Profit-Taking: Where Next for Metal? Precious metals were higher in the wake of the Fed's decision, with gold hitting a 7-week high ahead of the NFP. However, silver came off its record high last Thursday. Analysts attributed the pullback in silver to profit-taking after the metal was up 10% so far this month. A weaker dollar, combined with geopolitical concerns, is expected to support the precious metals complex amid demand for safe-haven assets heading into the extended holiday

period at the end of the year. Silver has outpaced gold this year, more than doubling in price amid strong industrial demand, falling inventories, and concerns about a potential shortage. Typically, during the final couple of weeks of the year, there is a surge in risk appetite that could dent precious metals. However, if the data indicates that the Fed may face renewed pressure to ease, silver could potentially lead to further gains.

Silver (XAGUSD) Eyes New Record Highs?

Silver has risen slightly above the measured-move projection of the pennant pattern that it broke out from at $54/oz in late November, establishing regional resistance near $65. If the NFP print is poor, it could lead to a breakout of the $60 handle, potentially reaching $70, as bulls could take advantage of intermediate resistance levels at $66 and $67.5. However, a hawkish interpretation of this week’s data trove could see silver heading back down below the $61 and the $60 round support. Support under the $59 swing lies at $57.50.

Source: SpreadEx | Spot Silver, 8-hour Chart