Gold and Silver Outlook for January 30-February 3

The markets are slowly realizing that perhaps the U.S. fiscal stimulus may not come anytime soon and perhaps some of its – mostly in the form of tax cuts – will be executed in 2018. But for now, the markets are trying to assess how the Trump administration will impact the U.S. economy and its stability. For gold and silver the risk off mode, which is creeping to the markets, is helping boosting the demand for precious metals. But this week the focus is likely to shift back to monetary policy and economic data as the FOMC, BOJ and BOE monetary policy meetings will take place; and the NFP report will also shake up markets if the report substantially deviates from the markets expectations. Let’s start with the Fed:         

For the FOMC this will be the first meeting of the year; this time there is no press conference. And following the recent rate hike the FOMC will try to keep the boat from rocking; so expect little changes to its statement. The FOMC still waits for what the new administration will do in terms of fiscal policy. Currently, the markets, based on the implied probability, give a 71% chance of a hike in and two hikes by December are estimated at 70% — nearly unchanged from last year. If the Fed doesn’t change much it’s statement this could have little impact on the markets.

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Source: CME Group

But gold and silver could still gain some ground on the Fed’s statement: If the statement were to turn a bit more dovish – which isn’t likely for now – this could boost bullion prices due to the expected drop in interest rates. If the report were to turn more hawkish – which is even less likely – this could present some downside risk in the short term of gold and silver.

The BOE and BOJ are also likely to remain on the fence and not present any major changes to their respective policies.

When it comes to economic data the main report will be the NFP that will be released on Friday. The markets estimate the growth in jobs will reach 170k and wage growth – 0.3% month over month. In the current business cycle the focus will be on wage growth. If wage growth slows down, this could suggest the market could reduce the chances of the number of hikes by the Fed this year, which could help boost the demand for gold and silver.

Takeaway

The bullion market is still seeking direction and even though both gold and silver started off the year on a positive note, the rally has slowed down as market participants try to assess what’s next for the U.S. economy in terms of fiscal and monetary policy. And until the fiscal policy becomes clearer the Fed isn’t likely to change much its stands from December. That’s why the news pouring out of the White House along with U.S. economic data will provide a lot of big swings for both precious metals in the near term. Nonetheless, once it will become more apparent and the hopes of a fiscal stimulus this year will evaporate gold and silver could start to pick up some more steam.

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