Precious metals started off last week on a negative note but as the week progressed they changed direction and rallied. The dovish/bearish statements of Yellen in the recent panel discussion along with the minutes of the previous FOMC meeting helped pull up gold and silver prices. This week the main U.S. economic data are CPI and retail sales; and in China the main reports that could move the markets include: GDP for Q1, CPI, industrial production, and trade balance. Let’s see how these reports could move gold and silver prices:
The minutes of the last FOMC meeting showed that the FOMC members are still concerned with the progress of the global economy and how a rate hike could adversely impact it. And based on the minutes the FOMC isn’t expected to raise rates this month. But June could still be a play. This will heavily depend on how the FOMC were to issue its April statement. If the Fed doesn’t hint of a possible hike in June, this will imply there is a small chance of a rate hike by then. Because the Fed will need to set the ground work for a June hike, the April statement will need to be the first stepping stone. In any case, for now the dovish statements of Yellen in the recent panel discussion and the minutes of the FOMC will keep the market expectations at very low chances of a hike anytime soon. According to Fed-watch, the implied probability for a June hike declined again to 22%. The chances for a September hike also slipped to 43%. And for December, the odds are at 59%. This means, the market still doesn’t believe the Fed will raise rates more than once this year – probability around December.
This week, the main focus will be China and U.S.: In China there are several economic reports including GDP, industrial production, trade balance and CPI. If these reports show China’s economy continues to recover (although the data coming from China should be taken with a grain of salt), this could help boost commodities prices including gold and silver. In the U.S. retail sales and CPI report will lead the way in moving the USD. If the core CPI keeps rising this could raise the chance of rate hike, which, in turn, could bring down bullion prices. And if retail sales show strong figures, this could boost the USD, which may also curb the rally of gold and silver.
ETFs holdings: By the end of the previous week, gold holdings of the gold ETF SPDR Gold Trust (GLD) slipped by 0.03%, week on week, to 817.81 tons of gold – still up by 27.31% year to date; silver holdings for the silver ETF iShares Silver Trust (SLV) rose again by 1.1% to 336.151 million ounces.
The recovery of gold and silver remains a matter of a weaker USD and lower interest rates. And if these trends persist, precious metals will continue to benefit from it and keep recovering. But if the U.S. economic figures – retail sales and core CPI – show higher than expected results, they could boost the USD, which in turn curb down the recent rise of gold and silver prices.
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