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Weekly Outlook: May 6 - 10 For Precious Metals


Gold futures rose to a three-week high early Friday, before trimming gains to end little changed after official data showed that the U.S. economy added more jobs than expected in April.

Some chart-based selling also weighed after prices failed to break above a key resistance level.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery eased up 0.15% on Friday to settle the week at USD1,461.75 a troy ounce.

Earlier in the session, Comex gold rose to a session high of USD1,487.15 a troy ounce, the strongest level since April 15.

Gold prices were likely to find support at USD1,439.75 a troy ounce, the low from April 25 and near-term resistance at USD1,487.15, Friday's high.

On the week, gold futures added 0.55%, the second consecutive weekly advance.

Gold futures came off the highest levels of the session after the U.S. Department of Labor said the economy added 165,000 jobs in April, above expectations for an increase of 145,000, while job increases for the previous month were revised up to 138,000.

The U.S. unemployment rate unexpectedly fell to a four-month low of 7.5% from 7.6% in March.

Also Friday, a report by the Institute of Supply Management showed that the U.S. service sector expanded at the slowest pace in nine months in April.

The ISM non-manufacturing purchasing managers' index fell to 53.1 from 54.4 in March, below expectations for a reading of 54.0.

A separate report showed that U.S. factory orders fell 4.0% in March, more than expectations for a 2.6% decline.

Gold prices continued to draw support from expectations central banks around the world will carry on with their monetary stimulus policies.

On Thursday, the European Central Bank cut interest rates to 0.5% from 0.75% amid concerns over the deteriorating economic outlook for the euro zone.

The ECB rate cut came one day after the Federal Reserve re-affirmed its commitment to leave interest rates unchanged near zero and continue buying USD85 billion in debt each month.

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its bond-buying program sooner-than-expected.

Gold can benefit from such an environment of easy money because of expectations that ample liquidity would put a damper on the value of paper currencies.

From a technical standpoint, the precious metal is expected to meet strong resistance at the USD1,490-level.

In the week ahead, gold traders will be focusing on interest rate decisions by the Reserve Bank of Australia and the Bank of England. Investors will be also be watching Chinese government data on inflation due on Thursday.

Elsewhere on the Comex, silver for July delivery rose 1.1% on Friday to settle the week at USD24.08 a troy ounce. On the week, silver future prices added 0.6%.

Meanwhile, copper for July delivery surged 6.5% on Friday to close the week at a three-week high of USD3.307 a pound. Comex copper prices jumped 3.85% on the week.

The industrial metal soared after Friday's stronger-than-expected U.S. non-farm payrolls data eased concerns over a slowdown in economic growth.

The upbeat data also prompted investors to return to the market and close out recent bets prices will move lower, a move known as short covering.

-- Robert Alan Yeatts Jr.