The latest positive news from the U.S labor market – the NF payroll showed 248K jobs added during September and August numbers were revised up to 180K – was enough to drag down the prices of gold and silver to a new low. Gold fell below $1,200 and silver below $17. These selloffs were didn’t vote well for the progress of bullion in the near future. This week, the main reports from the U.S that could move precious metals are JOLTS reports and minutes of the FOMC meeting. Besides these reports, we also have 3 rate decisions in Japan, England and Australia. Additional reports include China’s new loans, Canada’s employment update, Germany factory orders, and GB manufacturing production. So let’s examine the economic outlook for the week of October 6th to 10th:
To complete the picture of the NF payroll report, the JOLTS report will provide another aspect of the labor market from the demand side. It will show if there were any changes in the job openings, hires, and separations. As of last month, there were 4.7 million job openings nearly 22% higher than the same month last year. The current expectations are for a modest gain so that the number will rise to 4.71. If job openings don’t pick up, this could curb down a bit the recent USD rally.
But the main report of the week will revolve around the minutes of the FOMC. Last time, the FOMC members appeared to be slowly leaning more towards raising the cash rate next year a faster than previously expected rate. The importance of the minutes is to examine the general tone of the last meeting, and see if the minutes could offer more insight behind the last decision and future monetary steps.
Last time, following the release of the minutes, precious metals took a tumble the following day. It seems that with every meeting, the members are slowly shifting towards taking more hawkish steps. If this report shows a similar hawkish shift, this could result in another beating for gold and silver.
The forthcoming rate decisions aren’t likely to be too dramatic as BOJ, BOE and RBA aren’t likely to change their respective policy this week. But any changes to guidance or voting that isn’t unanimous could stir up the forex markets.
Following the recent fall in prices, the demand for gold as an investment shark again — gold hoards in the GLD ETF, the world’s biggest gold ETF declined to 767.5 tons by the end of last week – nearly 0.6% below the previous week and down by 3.5% since the end of August.
In the meantime, the ongoing recovery of USD against leading currencies didn’t help commodities including gold and silver. If the USD keeps rising, this could also reduce gold and silver’s shine as an investment.
My guess: Precious metals may see a modest gain as a correction for last week’s sharp losses, but gold and silver are likely to keep coming down on a weekly scale.
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