Gold and Silver take a hard knock as risk appetite returns

Gold prices have been on the defensive, falling from $1,553.03 to a low of $1,506.54, down -2.07% on the day so far as markets assess the trading and investment environment with slightly less pessimism, although many will assume a cautionary approach while plenty of uncertainty prevails. 

Gold futures dropped sharply as well, by more than $34 an ounce for the biggest one-day dollar loss since November 2016. December gold lost  2.2%, to settle at $1,525.50 on Comex. Meanwhile, silver prices have also dropped and significantly so, with spot prices losing over 4%, sinking from $19.57 to a low of $18.49. December silver lost 74 cents, or 3.8%, to $18.807 an ounce, after settling Wednesday at its highest since September 2016. By contrast, the gold and silver ratio was up 2.20% and completing a 50% mean reversion of the September drop. 

News that the U.S. and China will hold trade talks next month fuelled the risk-on rally

The news that the U.S. and China will hold trade talks next month fuelled the risk-on rally that was already in development following the Hong Kong news. However, ahead of tomorrow's key Nonfarm Payrolls data, markets were paying a keener than usual attention to the private jobs data released earlier today. U.S. August private ADP numbers coming in over 190,000 was a blockbuster beat vs a forecast of 150,000 and if this is considered as a prelude to tomorrow's numbers, then the Dollar can stay bid into the weekend ahead of the Federal Reserve this month - Indeed, evidence that the economy is growing will likely keep the odds of a 50 basis point cut at the bare minimum which is Dollar supportive. 

Gold levels

With the price balancing around 1516, the 23.6% Fibonacci (Fibo) retracement of the July lows to recent swing highs, on a break below the 1,500 level, bears can approach 1,478 as the 13 August volatility spike low which guards the 19 July swing highs at 1,452.93.  Bulls will need to find traction above 1,550 to open 1,590 as the 127.2% Fibo target area. Thereafter, bulls can target the 78.6% Fibo of the 2011 to YTD range located in the 1,730s ahead of the triple-top peaks of the 1,800s.

Silver levels

Bears are in control, hunting down the 23.6% Fibo retracement of the late May swing lows to recent swing highs around 18.38 ahead of the 17.50s being the 50% Fibo of 2016 highs to recent swing lows. The 17.60/70s could offer a solid level of support on the way there. On the upside, bulls can target 22, the 27s and finally,  a 50% mean reversion of the 2011 highs YTD in the 31.70s.