Gold and Silver Forecast for June 30- July 4

Gold and silver slightly rose last week and thus rallied in the past four consecutive weeks. During last week, the U.S GDP growth rate was revised down to -2.9%. This news may have contributed to the recovery of precious metals prices. Nonetheless, other economic reports were mostly positive: core PCE grew again by 0.2%, month over month; new home sales increased by 18.6% during May; existing home sales also rose last month; consumer confidence index rose to 85.2 in June; jobless claims slightly fell by 2K to 312K. Alas, these news items may have slowed down the rally of gold and silver. This week, the U.S NF payroll report and ECB rate decision will be the main events. Besides them, several economic reports, decisions and speeches will come to fruition such as: BOC rate decision, Yellen’s speech, EU flash CPI,  U.S pending home sales, EU monetary development, U.S, Australia and Canada’s trade balance reports,  U.S and China’s manufacturing PMI updates, and jobless claims. So let’s review the economic calendar for the week of June 30th to July 4th 

The price of gold slightly rose by 0.29% last week. Gold ended the week at $1,320/t. oz. Silver also modestly rose by 0.75%; the average weekly price was $21.06/t oz, which was 4.43% above last week’s rate $20.16/t oz.

Gold and silver Chart 2014  June 23
The chart above shows how both gold and silver rallied in the past several weeks (prices are normalized to the end of last month).

Let’s examine the main reports, events and public speeches that could impact the precious metals market during June 30- July 4 starting with the U.S economy

U.S

The main economic report of the week will be the release of the non-farm payroll report.

The table below shows the impact of the past non-farm payroll reports on the changes in gold, silver and USD/Yen currencies pairs in 2013-2014.

U.S.Labor Reports gold price and silver prices June 28  2014
As you can see, the
recent release didn’t have much of an effect on gold and silver prices, as the rise in employment was close to market expectations and remained well above 200K. 

If the next report shows another sharp rise in employment, which will be inline with market expectations, the NF payroll report could have a modest negative impact on bullion prices.

Besides the release of this report, Janet Yellen, the Chair of the FOMC, will give a speech at the International Monetary Fund, Washington, D.C. The title of her speech is “Financial Stability”.

It’s unlikely to influence bullion investors, unless she refers to any future plans to change the FOMC policy.

Besides the NF payroll report and Yellen’s speech, several other economic updates will be released such as: pending home sales, trade balance, manufacturing and non-manufacturing PMI, and factory orders. If these reports show the U.S economy is expanding, this could curb down the rally of precious metals.

During the previous week, the US dollar moderately depreciated again against leading currencies including Yen, Euro and Aussie dollar. The correlations among gold, silver and leading currencies pairs have strengthened in recent week, but they remained weak. Thus, the recent drop of the U.S dollar didn’t have much of an effect on gold and silver. 

Europe

This week, the ECB decided last meeting to cut its cash rate to 0.15% and deposit rate to -0.1%. This news, however, didn’t have much of a long term effect on the Euro. The current expectations are that the ECB will maintain its monetary policy unchanged. But if the ECB hints of any future changes to policy this could stir up the forex and commodities markets.

Besides the rate decision, the EU M3 money supply and EU retail sales update will be released this week.

Asia

China’s manufacturing PMI report 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 slightly rallied against the US dollar. If the rupee keeps appreciating, it could strengthen the demand for the yellow metal in India.

 

Finally, during the previous week, gold holdings of SPDR gold trust ETF rose by 0.31%. The ETF is still down by 2.02% since the start of 2014. Gold holdings were at 785.016 tons by the end of last week. If the ETF’s gold holdings start picking up, this may signal the demand for gold as an investment is recovering.

 

Takeaway

The rally of gold and silver prices might reach a wall this week. If the U.S economy keeps improving and the NF payroll shows a rise of over 200K jobs, this could be enough to slowly bring down precious metals prices.

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