Gold and Silver Outlook for August 10-14

The NFP report came close, but still a bit short, of market estimates. This report, however, didn’t provide any clarification about the Fed’s rate hike timing, if at all, any more than the FOMC meeting did in the preceding week. Where does it leave gold and silver? They bounced back a bit on Friday, but their general slow descent is likely to continue unless new U.S. economic data were to suggest a slower recovery. This week, the main events and reports to consider include: U.S. core retail sales, industrial production, JOLTS, Consumer sentiment, Great Britain Claimant Count, Germany’s GDP for Q2, China’s industrial production and EU CPI.  For the complete overview for this week’s events see here.

Even though the market expected for a gain of 224K, the report came, well, close to this number with 215K jobs added last month. Nonetheless, the markets reacted to this report with a slight disappointment: In the foreign exchange market the USD slightly devalued against major currencies; gold and silver bounced back. By the end of the week, gold modestly declined while silver rose.

U.S.Labor Reports gold price and silver prices Aug 2015Source: Bloomberg, BLS

Despite the reaction from the NFP, the U.S. dollar also didn’t move much last week as it slid against the Euro and Yen – this weekly trend also provided another boost to the bullion market.

This week, we have the JOLTS report that will provide another look at the jobs market, albeit it’s lagging by two months – this upcoming report will pertain to June. But this report is also highly viewed, mostly by the FOMC. Last time, the JOLTS slightly fell to 5.36 million. But this time, the report is expected to show a rise in JOLTS to 5.42. A fall in this indicator could reduce the odds of a rate hike this year.

In the U.S. other major reports include retail sales, PPI, consumer sentiment and industrial production. These reports’ impact on precious metals could come via the movement of the USD. If these report beat market estimates and show the U.S. economy is rebounding, the USD could rally – a move that may bring back down gold and silver.

As of end of the previous week, the implied probabilities of rate hike in October rose to 38%; for December the odds also slightly grew to 60%.

ETFs precious metals continue to sell off their metals: The gold holdings of GLD declined by 0.7% to 667.7 – down by 6.3% from the beginning of the year; the leading silver ETF SLV also lost 0.2% of its silver holding and is down by 1% for the year, up-to-date.

Final note

The bullion market could keep reacting to the NFP at the beginning of the week. But as long as the market isn’t sure where the USD is heading and the Fed keeps us guessing, gold and silver aren’t going far. This week, we have U.S. reports that will mostly focus on the consumer and the JOLTS report. Unless they present any dramatic shift from expectations, gold and silver will likely to resume their downward slope.


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