Gold and Silver Set to Shine: Post-NFP Dip Presents Prime Buying Opportunity

If gold and silver prices dip following tomorrow’s nonfarm payrolls report traders should treat it as a buying opportunity, according to Christopher Lewis, market analyst at FX Empire.

“The gold market has been very quiet during the Thursday session, but this should not be a huge surprise considering it was Independence Day in the United States, so the futures market itself would have had very limited trading,” Lewis wrote. “Nonetheless, we can look at the chart and see what the proclivity is, and it is to the upside.”

Lewis noted that Friday morning’s employment report will have a major influence on gold prices going forward. “Because of this, what I’m hoping for, quite frankly, is that we get some type of sharp pullback that I can buy into,” he said. “The upward proclivity I think continues for the foreseeable future, because quite frankly, there’s too many things working in favor of gold.”

“The first one of course is that major central banks, Russia, China, and India, a whole host of other central banks are all buying gold,” Lewis said. “The West, especially the United States, is borrowing massive amounts of money and that will debase the dollar eventually. And therefore, it does tend to drive gold up over the longer term. And then of course there’s a lot of geopolitical risk out there.”

“A fourth reason, quite frankly, would just be the fact that we’re in an uptrend,” he added.

Lewis said that the gold market has been “working off some froth” for several months, but he believes that “we will eventually go looking to reach the $2,400 level and then perhaps break above there.”

“A pullback to the 50-day EMA, or better yet, the $2,300 level would be an excellent entry as far as I can see,” he said. “I have no interest in shorting gold and at this point in time, even if we broke down, I just looked to buy it at even lower levels.”

Turning to silver, Lewis noted that the gray metal has bounced up and down during Thursday’s trading, but he isn’t reading much into the moves owing to the low liquidity from the U.S. holiday. He said that silver’s performance following nonfarm payrolls is what he’ll be watching, and like gold, he’s hoping for a pullback. 

“[W]e could drop from here, but I think that ends up being a buying opportunity,” he said. “The $30 level would be the first support level, but underneath there we have the 50-day EMA, which is closer to roughly $29.25.”

“Whether or not we get all the way down there remains to be seen, but I do think you have a situation where it’s going to be all about the US dollar and the reaction to the jobs number,” Lewis said. “If the jobs number comes out stronger than anticipated, that could strengthen the US dollar and that could very well work against silver, at least temporarily. But Wall Street’s pretty convinced, especially after yesterday’s press conference with Jerome Powell, that an interest rate cut is coming and therefore they’ll continue to try to inflate commodities.

Lewis said it’s important to recognize that USD will largely dictate silver’s price action in the near term. 

“I don’t think there’s anything magical about this market other than it’s priced in US dollars,” he said. “So, we’ll have to wait and see. If we were to turn around and break down below $28.50, and I don’t think we do that on Friday, then this market could really start to unravel. But I think we’re more likely to see $32 challenged over the next several weeks than a breakdown like that.”

This article originally appeared on Kitco News.