Precious metals prices fell again last week, as the USD pulled up. This week, the GDP for Q2 and PCE will be release in the U.S, which could impact the bullion market. The recent Jackson Hole Symposium ended with Yellen stating again the labor market still has room for recovery, but also left the door open for a cash rate increase at a sooner than expected time. So let’s break down the economic calendar for the week of August 25th to 29th.
This week, the upcoming GDP for the second quarter and PCE reports will be the main economic publications that could move the bullion market.
For the GDP, in the first estimate, the GDP grew by 4.1%. This upcoming estimate, analysts suspect little change as it could come down to only 3.9%. But if the GDP shows a harsher fall and comes down even further, this could pull back up the price of gold. In such a case, silver is likely to follow.
The second report is the PCE, which is another index that estimates the development in the US inflation. In the previous estimate, the core PCE, which excludes energy and food prices, reached an annual rate of 1.5% – nearly unchanged from its past update. The current inflation target is still higher at 2%. So if the inflation picks up, in this report, this could bring up the odds of the FOMC raising the cash rate before the current market expectations of mid-2015. In such a case, this could negatively impact the bullion market over the short term.
Other U.S reports will come out this week including core durable goods, consumer sentiment, pending and new home sales, housing; they are likely to have little impact on precious metals prices.
In the meantime, the demand for gold as an investment changed direction and rallied as the amount of gold in the GLD ETF, which is the world’s largest gold ETF grew in the past week. The current gold holdings are at 800.085 tons by the end of last week – nearly 0.56% from last week but still down by 0.22% since the beginning of the month. This recent rise suggests the demand for the yellow metal as an investment has slightly improved.
The U.S equities are recovering as the S&P500 index rose by 3% since the beginning of August. If the stock markets keep picking up, this could steer more investors away from bullion and into equities.
During last week, the US dollar rallied against the Euro and Yen. If the USD continues to strengthen, this turn of events could further bring down gold and silver.
The upcoming GDP and PCE reports could have some short term effects on bullion prices, but the weakness of precious metals could continue as the USD rallies and the US equities recovers.
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