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  • Silver is a little higher on Friday amid a weaker USD after soft US NFP data.
  • XAG/USD has advanced to the north of the $26.50 mark, though if off $26.80 highs.

Spot silver prices (XAG/USD) are a little higher on the final trading day of the week; XAG/USD has advanced to the north of the $26.50 mark, though if off $26.80 highs that were printed amidst a choppy reaction to a mixed US labour market report. A gradual weakening of the US dollar seems is the main reason why silver markets have seen some recovery today; the Dollar Index has dipped back into the 91.20s from Thursday levels above the 91.50 mark, though still hold onto solid gains on the week.

Indeed, this week’s US dollar strength has been the main reason why spot silver has given back all of the gains it managed right at the start of the week; as a reminder, huge retail/speculative interest in silver sent prices flying higher at the start of the week and the precious metal hit multi-year highs above the $30.00 handle. However, all those gains are no gone. On the day, XAG/USD is up abut 0.75% or around 20 cents.

US Labour Market Data Recap

In an immediate reaction to Friday’s US labour market report, spot silver saw a strength, though much of this was quickly pared back. As a recap; the US economy added 49K jobs in January, almost bang on consensus expectations according to Reuters, but a little below consensus according to Bloomberg. Somewhat disappointingly, however, most of these jobs added were in government employment (up 43K), not in the private sector (+6K). Surprisingly, the unemployment rate dropped to 6.3% from 6.7%, but this was in part driven by a drop in the participation rate to 61.4% from 61.5%. The U6 underemployment rate was 11.1%, down from 11.7%.

Meanwhile, Average Hourly Earnings continue to grow at a historically elevated pace, though these numbers are distorted by the disproportionately high level of job losses in lower-paying sectors of the economy (like hospitality and leisure) that have been more heavily impacted by the pandemic and lockdowns. All in all, not a great report, hence the minor strength seen in safe-haven precious metals markets; weaker data is better silver if 1) it takes some steam out of US dollar strength (which it appears to have done on Friday) and 2) it helps keep Fed policy ultra-accommodative for longer.

In terms of the big picture; does Friday’s labour market report change the outlook for US fiscal or monetary policy? Not really. A soft report will keep some pressure on Congress to act, which is arguably a positive for risk appetite. But they would be delivering more stimulus regardless. The Fed, meanwhile, is still a long way off from thinking about tightening.