Gold and Silver Report for May 22-26

Market volatility made a very quick and short comeback last week on Wednesday following the political unrest in the U.S. This time, it was followed by the Comey memos about his meetings with President Trump that raised market concerns over possible impeachment at worse and a setback of Republicans’ agenda at the very least. Will volatility make another appearance soon? And what’s up ahead this coming week for gold and silver?   

The bullion market heated up last week as markets were concerned over the political climate in the U.S. But this rally didn’t last long as the sharp spike in volatility and risk off mode evaporated in the next couple of days of last week. Usually, the markets aren’t likely to maintain their risk-off sentiment if it’s related political risk as was the case time and time again: e.g. Brexit. So, it will be hard to relay on the recovery of gold and silver due to political risk. At best, we could see some more short term rallies if similar events were to surface again.

The recent news related to Trump also suggests the markets are less optimistic of any fiscal stimulus – via infrastructure spending or tax cuts – any time soon. Thus, this puts less pressure on the Fed to raise rates in the near term; that could partly explain the modest drop in the chances of a hike in June. The low inflation and wage growth could also be another factor. If the Fed were to windup pushing the rate hike to a later date, this could help pull up gold and silver prices.

This week, we will get several FOMC members’ speeches including by Harker, Kaplan  , Evans and Brainard that will help confuse the market as to where the Fed stands on raising rates in June. If all members were to be on board to raising rates – as they were back before the March rate hike – this could be enough to signal a June hike. But if they turn back to voice different opinions – as they usually do – then the markets will keep the door open without changing by a lot their outlook about a possible June hike. The FOMC will also release the minutes of the last meeting that could also shed some light – or more likely confuse again the markets – about what the Fed plans to do next.

The U.S. will also have economic data released including durable goods, and GDP for Q1 (second estimate). Any signs of weakness could trigger another selloff of equities and reduce the chances of a rate hike – this may create a risk off mode in the markets that creates upward risk in the short term for precious metals.

Finally, the political risk could rear its head again in the future but isn’t likely to have more than a very short term impact on the markets in general and bullion in particular. This week will also be about – who else – the Fed with FOMC minutes, FOMC members’ speeches and economic data that could impact the odds of a rate hike and the direction of gold and silver.

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