Gold and Silver Forecast for July 7-11

Precious metals didn’t do much last week and their rally of the past several weeks seems to have reached an impasse. Yellen’s speech at the IMF had a dovish tone as she restated a rate isn’t likely to occur anytime soon. This speech may have provided some backwind for the gold and silver to moderately rally earlier last week. Conversely, the release of the NF payroll report, in which 288K jobs were added and the rate of unemployment declined to 6.1% may have contributed to the decline of bullion at the end of last week. Will gold and silver change course and fall? This week, the minutes of the recent FOMC meeting, JOLTS, and jobless claims will be released. In Europe, BOE rate decision and Germany’s trade balance report will come out. Finally, in China the CPI, trade balance and new loans will be released. So let’s breakdown the economic calendar for the week of July 7th to 11th 

The price of gold inched up by 0.05% last week; the average price reached $1,325.03/t. oz which was 0.42% above last week’s average. Silver edged up by 0.01%; further, the average weekly rate was $21.13/t oz, which was 0.33% above last week’s price.

Let’s review the main reports that could impact the precious metals market during July 7-11 starting with the U.S economy

U.S

Last week, the U.S NF payroll report showed a rise of 288K in jobs, this report may have contributed to the decline of gold and silver prices, as indicated in the chart below.

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

This news could keep having some lingering adverse effects on the bullion market earlier this week.

Looking forward, the main publication of the week will be the minutes of the last FOMC meeting. Back in June, the FOMC decided to taper its asset purchase program by $10 billion to a pace of $35 billion a month.  But the dovish tone in Yellen’s statements at the press conference was enough to pull up gold and silver. The upcoming minutes might provide some information on this decision, the FOMC’s future monetary steps and especially the decision process about raising its interest rate;

Besides the minutes of the FOMC meeting, several other economic updates will be released most notably is the JOLTS report. If the report shows the U.S economy is expanding, this could also drag down precious metals.

During last week, the US dollar moderately appreciated again against leading currencies including Yen, Euro and Aussie dollar. The correlations among gold, silver and leading currencies pairs have strengthened last week, but they remained weak. Thus, the recent recovery of the U.S dollar didn’t have much of an impact on precious metals prices.

Correlation Gold and EURO USD 2014 June 8

Asia

China’s new loans, trade balance and CPI reports will be published. The progress of the Chinese economy could indicate the potential changes in China’s demand for gold.

During last week, the Indian Rupee rose again against the US dollar. If the rupee keeps rising, it could strengthen the demand for the yellow metal in India.

Finally, during last week, gold holdings of SPDR gold trust ETF jumped by 1.45%. The ETF is still down by 0.6% since the beginning of 2014. Gold holdings were at 796.392 tons by the end of last week – the highest level since mid-April. If the ETF’s gold holdings keeps picking up, this may signal the demand for gold as an investment is strengthening. 

Takeaway

The slowdown in gold and silver’s rally might even change direction and further fall on account of the recent strong NF payroll report and if the JOLTS report keeps showing the U.S labor market is improving. Conversely, the minutes of the FOMC meeting could pull up the bullion markets. Finally, the expected rise in the Indian rupee and the potential recovery of China’s economy could also have a modest positive impact on gold and silver prices.

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