The prices of gold and silver recovered again in the past week mainly by the end of the week following the recent decision from Beijing to slash the interest rate in order to deal with the economy’s sluggish growth rate in recent quarters. The FOMC released the minutes of the last meeting and didn’t provide big headlines or change its hawkish tone enough to pull back up precious metals. This week, before the U.S. holidays start, the main reports to come out include: Third quarter GDP, core PCE, core durable goods, new and pending home sales, and consumer confidence. Other events and reports include: German business climate, EU monetary developments, EU flash CPI and unemployment update, Australia Private New Capital Expenditure, and Canada’s GDP. So let’s breakdown the economic outlook for the week of November 24th to 28th:
The minutes of the FOMC meeting didn’t provide any big headlines as the hawks remained in the charge. The FOMC members talked about the potential slowdown in China, Japan and Europe but didn’t think it will have a strong adverse impact on the U.S. They also voiced limited concern over the U.S. inflation, but not enough to do something about it. For now, these issues suggest the FOMC may start to turn more hawkish in the near term, which could bring down in bullion prices. The next FOMC meeting in December could provide the much needed fireworks.
This week, the U.S. GDP for the third quarter will be released. This will be the second estimate. In the first estimate, the report came out higher than expected at 3.5%. This time, the expectations are for the GDP to inch down to 3.3%. If the report shows a higher growth rate, this could contribute to the decline in gold and silver prices.
Besides the GDP, several other reports will be released including housing sales. The progress in the housing market could also provide another indication for the growth in U.S economy. The core PCE will also be published and it’s another key indicator for the progress in the U.S. inflation. The FOMC follows this report and if it shows a higher than anticipated growth rate in the core PCE, this could pull back up gold and silver prices.
In Europe, the EU flash CPI, monetary developments, and unemployment reports will be released this week. The progress of Europe could determine the direction of the Euro/USD.
During last week, gold holdings in the GLD ETF, the world’s leading gold ETF, only inched up to 720.914 tons by the end of previous week –a 0.04% gain; it’s still 6.6% lower than its levels recorded at end of September.
The U.S. dollar rose against the Euro, Aussie dollar Yen. If the U.S. dollar were to keep going up against other currencies, this could pressure down precious metals.
The recent recovery in the gold and silver market may have partly been due to the recent news from China, which coincided with the rally of other leading commodities prices such as crude oil and natural gas prices. The upcoming GDP and PCE reports could play a role in the direction of gold and silver. If they meet or exceed market expectations, precious metals could pull back down – my guess, this is a more likely scenario. Otherwise, gold and silver may resume their slow recovery.
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