Silver Price Analysis: XAG/USD rallies above $22.10, shrugging off barrage of US data pre-NFP

• Silver prices are holding onto gains in wake of a barrage of US labour market data.
• XAG/USD was last up around 1.3% in the $22.10 area and eyeing a test of last week’s highs.
• Focus is now turning to Friday’s official labour market report.

A barrage of US labour market data in recent trade gave mixed signals, with ADP’s estimate of employment change for May missing consensus and adding some downside risks to the market’s expectations for a 325K gain in non-farm payrolls in May on Friday, while the second estimate of Q1 Unit Labour Costs saw an upward revision to 12.6% QoQ from an already spicey 11.6%. Weekly jobless claims data was also robust, but the net impact has been that the US dollar has fallen to fresh session lows in recent trade as US yields continue to trade with losses on the day.

This has created a favourable backdrop for spot silver (XAG/USD) prices, which were last trading up about 30 cents or roughly 1.3% on the day in the $22.10 area per troy ounce. That marks a more than 3.0% bounce from Wednesday’s sub-$21.50 lows, with the bulls now eyeing a test of last week’s highs just under $22.50.

However, any bullish breakout in silver will have to wait until after Friday’s official US labour market report is released. If job gains do underwhelm, thus indicating a weaker than expected economy and less pressure on the Fed to tighten monetary policy so aggressively, that could provide impetus to the bulls. A break above resistance in the $22.50 area would open the door to a run higher towards $23.00 and resistance in the mid-$23.00s.

Note that traders will also be closely watching Friday’s US wage growth metrics and if these surprise on the upside, that would come as a worry to the Fed (and markets), as everyone has been hoping that inflation might have now peaked. In this case, a dip back below the 21-Day Moving Average (at $21,76), which XAG/USD has been pivoting either side of in recent weeks, is on the cards, plus a test of earlier weekly lows in the mid-$21.00s.