Gold and silver markets are navigating a complex landscape as expectations about the Federal Reserve’s monetary policy continue to evolve. As of the end of the week, gold remains supported above the $2,500 mark but is trading in relatively neutral territory, with December futures last recorded at $2,525 per ounce, showing little change from the previous week.
In contrast, silver has struggled, unable to maintain its support level at $28.50 an ounce. December silver futures ended the week at $28.24, reflecting a 3% decline from the previous Friday. The drop in precious metals follows a recent employment report from the Bureau of Labor Statistics indicating a cooling labor market, albeit at a moderate pace.
The U.S. economy added 142,000 jobs in August, falling short of the anticipated 164,000. The unemployment rate fell slightly to 4.2%, and wages increased by 0.4%. Analysts believe this data supports the Federal Reserve’s likely move to cut interest rates by 25 basis points later this month.
Paul Ashworth, Chief North American Economist, noted, “The 142,000 gain in non-farm payrolls in August is likely to prompt the Fed to opt for a measured 25-basis-point rate cut rather than a more significant reduction. However, the labor market is clearly showing signs of a slowdown.”
Despite growing expectations of a 25-basis-point cut, gold prices may face near-term vulnerability, as the market struggles to break through resistance at $2,550 an ounce. Ole Hansen, Head of Commodity Strategy at Saxo Bank, commented, “This report is not weak enough to justify a 50-basis-point cut on September 18. Consequently, the market might face challenges reaching new highs, with potential downside risks for 2-year government bonds and short-term SOFR contracts.”
Philip Streible, Chief Market Strategist at Blue Line Futures, anticipates that gold will remain capped at initial resistance levels around $2,550 an ounce but remains a buy on dips. He emphasized, “Gold would benefit from a series of 25-basis-point cuts rather than one larger move. The path of the Fed’s rate cuts is crucial for gold’s future performance.”
Christopher Vecchio, Head of Futures & Forex at Tastylive.com, highlighted the current technical scenario for gold: “Gold appears heavy from a long-term perspective but maintains strong short-term bullish momentum. Expect some consolidation as these perspectives align. Long-term, gold remains attractive as global government debt rises and interest rates fall.”
Despite short-term fluctuations, gold holds strong support above $2,500 an ounce. Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, affirmed that gold remains solid above this level. Lukman Otunuga, Manager of Market Analysis at FXTM, added, “The market is focused on next week’s Consumer Price Index report, which could sway the debate between a 25- or 50-basis-point rate cut. A weaker dollar and falling Treasury yields could still benefit gold.”
Otunuga also noted, “Gold remains in a broad range with key levels at $2,532, $2,500, and $2,473. If $2,500 holds as support, prices might challenge historical highs. Conversely, a drop below $2,500 could lead to a test of $2,473.”
Looking ahead, markets will also be watching the European Central Bank’s upcoming monetary policy meeting, as it grapples with persistent inflation pressures and slowing economic activity.
