Precious metals prices remained relatively flat throughout the week; the recent economic data from the U.S. including retail sales were slightly disappointing but not enough to change much market sentiment nor interest rates. Looking forward, some major economic data from the UK will be released: CPI, Claimant Count Change and retail sales; they could shed some light about the early ramifications of the Brexit vote, which may prompt a rise in demand for bullion. In the U.S. the main economic data to come out include: The minutes of the FOMC meeting, housing starts, CPI, and Philly Fed index. Let’s examine what’s next for gold and silver:
The summer is kicking in to full gear and with the Olympics and the U.S. presidential elections at full swing, the markets are likely to see much lower trading volume; this could also result in sudden big price swings – bear in mind the Chinese yuan devaluation was back in August 2015. Nonetheless, for now, gold and silver prices are likely to keep taking the lead from the direction of the USD and interest rates, which haven’t move by a big margin in the past week. The minutes of the FOMC could also impact markets if the minutes were to reveal some insight behind the last FOMC meeting – remember the last meeting didn’t have a press conference nor did it have an economic outlook update – this could influence market estimates about the probability of a rate hike this year.
Following the release of the recent economic data, by the end of the previous week, the implied probability for a September rate hike declined to 6%; and for December the chances of a hike have only edged down to 43%. The modest change in the December chances could also partly explain the lack of direction in the price of gold. It’s also worth pointing out that two factors that tend to move bullion prices have pulled prices in different directions: The U.S. dollar devalued against the Euro and Yen – which helped push up gold and silver; while long term interest rates haven’t move much and are slightly up since the beginning of the month.
Finally in the UK the economic data will give a first glimpse of how the Brexit vote affected the UK economy. If these economic figures show a much grimmer picture of the state of the economy than expected, this could prompt a risk-off mode in Europe, which could also help drive back up gold and silver prices.
ETFs holdings: By the end of last week, gold holdings of the gold ETF SPDR Gold Trust (GLD) declined by 1.31%, week on week, to 960.45 tons of gold; silver holdings for the silver ETF iShares Silver Trust (SLV) increased again by 0.3% to 351.765 million ounces.
Gold and silver didn’t do much in the past week; this week, the FOMC’s minutes could move markets if they end up revise market expectations about the Fed’s future rate hikes. But considering the FOMC isn’t trying to stir up the market, the minutes aren’t likely to show anything new. And unless the economic data coming from the UK were to come well below market estimates – which could lead to another risk-off selloffs in the markets and perhaps push up the demand for precious metals – the prices of gold and silver aren’t likely to move in a clear direction this week.
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