Gold and Silver Forecast for July 28-August 1

Silver and gold resumed their downward trend during most of last week. The recovery of the USD against leading currencies may have contributed to the decline of precious metals. The lack of growth in the U.S equities and the drop in U.S home sales didn’t pull up by much bullion prices by the end of last week. This week, the FOMC will convene again and decide of any changes to policy. In addition, the main U.S economic reports include: Non-farm payroll report, GDP for the second quarter, consumer confidence, manufacturing PMI, PCE, and pending home sales. In Europe, Germany’s retail sales, unemployment and CPI will be released. EU’s flash CPI will also come out. Finally, China’s manufacturing PMI will be released. So let’s review the economic calendar for the week of July 28th to August 1st 

The FOMC members will meet in a two day session, in which they will decide of any changes to policy. The current expectations are that the FOMC will taper again QE3 by another $10 billion. In the past, this news tended to have a negative impact on the bullion market, which is likely to be the case this time as well. Nonetheless, the impact this news has had on precious metals has diminished in recent meetings.  Further, the last meeting had a dovish tone, which resulted in a rise in gold and silver prices.

Besides the FOMC meeting, the non-farm payroll report will be released at the end of the week. If the report shows another sharp gain in employment of well above 200K, this could have a negative effect on gold and silver, as it used to have in the past.

U.S.Labor Reports gold price and silver prices July 5  2014

The U.S PCE will refer to June’s figures and could serve as another indication for the progress of the U.S inflation. If the PCE continues to pick up, this may have a positive impact on gold and silver, as indicated in the chart below.

gold pceThe GDP for the second quarter and manufacturing PMI will be published. They could drag down gold and silver if they meet or exceed the market expectations.

During last week, the US dollar mostly appreciated against the Euro and Yen. If the USD continues to pick up, mainly as the upcoming economic reports show higher than expected results, it could bring down gold and silver.

Finally, during last week, gold holdings of SPDR gold trust ETF change direction and fell by 0.41%. The ETF is up by 0.08% since the beginning of the year. Gold holdings were at 801.844 tons by the end of last week. If the ETF’s gold holdings continues to fall, this may signal the demand for gold as an investment is diminishing.

Bottom line

The tensions in the Middle East and between Russia and U.S could raise the risk level in the markets, which could play in favor of the bullion market. Further, the volatility is likely to pick up. But last week’s fall in gold and silver could resume, if the U.S reports show higher than anticipated results and the FOMC keeps tapering its asset purchase program.

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