Gold and Silver Outlook for October 3-7

Gold and silver didn’t perform well in the past week even though the USD remained relatively flat while the chances of a December rate hike slightly picked up. Moving forward, this week’s main event will the NFP for the month of September that will come out on Friday. Will this be enough to further drag down gold and silver? And also what else could impact the direction of bullion prices moving forward? Let’s take a look at what’s up ahead for gold and silver prices.  

The markets currently expect a gain of around 170K jobs in the upcoming NFP report and a gain of 0.2% in wages, month over month. Much like in the past, the markets will move accordingly so that a higher number in jobs could be enough to raise the chances of a rate hike in December; but if jobs grow by only 150K or lower, this will put another nail in the “raise rates this year” coffin.

u-s-labor-oct-3-2016

Source: BLS and Bloomberg

Other reports coming out of the U.S. that could move markets include: manufacturing and non- manufacturing PMI and factory orders. If the reports show a stronger than expected gain, this could also help push up the chances of a rate hike in December, which could drag down gold and silver.

But besides the economic developments in the U.S. the ongoing changes in the polls about the presidential elections could also impact financial markets; although so far the news coming from the polling seems to have had limited effect on markets. As of the end of last week, the implied probability of a rate hike in November slipped to 10%; while for December the odds rose to 62%.

In Europe, the unfolding of the Deutsche Bank story shook up the markets. But this week the EU focus will likely come back to the Brexit vote considering Britain’s PM Theresa May set a date for the Brexit for the end of Q1 of 2017.

ETFs holdings: By the end of the previous week, gold holdings of the gold ETF SPDR Gold Trust (GLD) declined by 0.34%, week on week, to 947.95 tons of gold; silver holdings for the silver ETF iShares Silver Trust (SLV) also decreased by 0.4% to 362.909 million ounces.

Bottom line

The markets are still moving from risk-on to risk-off mod on a nearly daily basis with no clear trend in sight. For gold and silver the direction remains unclear: On the one hand, the USD has been going sideways, which isn’t moving bullion prices; on the other, the high uncertainty in the markets – taking into account the U.S. presidential elections, the Brexit talk, the struggle of EU banks (including Deutsche Bank) just to name a few – should help push up the demand for vehicles which are received as safe haven such as gold and silver. And this all comes on top of the market reacting to every economic report coming from the U.S. and how it moves the chances of a rate hike by the Fed in December. So if we were to see a strong NFP report that could be enough to end the week for bullion in the red again.

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