Gold and Silver are Likely to Fall Back to Their 2014-Lows

Last week, gold and silver were consolidating ahead of the NFP. Both metals had a bullish start to the year, but have retreated through February and was positioned to fall lower in March. However, traders wanted to make sure the NFP passed the test for the FOMC to be on track to raising rates around mid-year.

NFP Impresses; USD Surges:
Indeed, the NFP was better than expected (295K vs. 240K forecast). The unemployment rate also fell faster than expected to 5.5% from 5.7%. Even though the same story goes for a lack of wage growth and low participation rate, the market reacted with boost in the USD across the board.

Gold (XAU/USD) Daily Chart 3/9

The daily chart shows that price broke a consolidation range roughly between 1190 and 1220. This consolidation occurred at the bottom of the moving averages cluster (200-, 100-, and 50-day SMAs), barely above 1200 (the daily candles all closed above 1200), around a rising trendline, and while the daily RSI was around 40. This shows a market at the crossroads, hanging on to the last bit of bullish bias ahead of the NFP. After the jobs data, gold traders relinquished the positioning around 1200, exposing the 1130, 2014-low.

At his point, a break back above 1240 might revive the bullish outlook, as it would push above a falling trendline, a previous resistance pivot, and would be threatening the 200-day SMA again.

Silver (XAG/USD) Daily Chart 3/9

Silver was more advance than gold in terms of showing bearish bias even ahead of the NFP. Note that price was consolidating under the SMAs, a rising trendline, and a support/resistance pivot, around 16.50.

After the US jobs data, price fell below 16.00. There could be some brief support around 15.50, but if price can hold below 16.50, the downside risk remains towards the 2014-low around 14.65.

A rally back above 17.00 might revive the bullish outlook as it would result in a breakout above a falling wedge pattern.