Gold and silver started off last week strong only to come back down in the following days. The minutes of the FOMC took the back seat to the aftermath of the disappointing NFP report. The progress of the USD is likely to determine the direction of gold and silver. This week the main reports include: ECB’s rate decision, U.S. CPI, China’s GDP for Q1, BOC rate decision, Australia’s employment report, U.S. housing starts, U.S. consumer sentiment, China’s industrial production, and Philly Fed index. Here is a preview for April 13th to 17th, 2015:
The market’s reaction of gold and silver rising came at the beginning of the week after the non-farm payroll report showed on Friday a mere increase of 126K during March – well below market expectations and below the rate recorded in the past year. This news, however, didn’t keep gold and silver prices up for long as both metals changed course and came back down in the following days. The recent recovery of the USD compared to the Euro, yen and Canadian dollar may have curbed down the rally of precious metals.
Also, the minutes of the FOMC meeting were preserved, depends who you ask, as dovish – as such it balanced the hawkish statement that was released last month. This news didn’t seem to move markets including gold and silver.
This week, the ECB will announce of any changes to its monetary policy. Even though, ECB isn’t expected to make any big changes, it’s still an even that could move the Euro. ECB’s QE program has commenced and Draghi could provide some additional information about the future progress of this program.
Some reports to be released in the U.S. this week include: CPI, retail sales, Philly fed and consumer sentiment. These reports will provide additional insight about the progress of the U.S. economy. If the U.S. economy shows a slower progress, this could turn back down the USD, which could also benefit precious metals. After all, this could also reduce the probability of the FOMC raising rates in the coming months and turning a bit more dovish.
Following the recent developments, the implied probabilities of a rate hike have slightly increased to 17% for July and 34% for September, based on the calculation of the CME.
Other reports that will be published this week include: China’s GDP and industrial production. China is among the leading economies in consuming gold. If China’s economy progresses at a slower pace, this could suggest the demand for physical gold may soften.
By the end of last week, gold holdings in the GLD ETF declined to 734.29 – a 0.4% slip compared to the previous week; even though the ETF’s gold holding have dropped in the past few months, they are still up by 3.1% for the year, up to date.
What’s up ahead?
The progress of the USD is likely to lead the way for gold and silver. The recent recovery of U.S. dollar against the Euro and yen could keep pressuring down precious metals. If the U.S. economic reports including retail sales and CPI fail short of market expectations, this could bring back up precious metals.
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