Gold and silver bounced back on Friday following the release of the U.S. NF payroll report, which was slightly below expectations in terms of growth in number of jobs – 214K and not 230K as anticipated. Despite this rally, both precious metals were still down for the week. Looking forward, this week’s events and reports include U.S. JOLTS and retail sales, EU GDP for Q3, Canada’s manufacturing sales and U.S. consumer sentiment. So let’s breakdown the economic preview for the week of November 10th to 14th:
The bullion market kept cooling down during most of last week until Friday when the NF payroll report came out.
The table above shows the reactions of gold and silver to past NF payroll and the ADP report during the past couple of years.
As you can see, gold and silver tend to have a negative reaction to U.S. employment especially when the number of added jobs comes short of market expectations. This time, the NF payroll report was very positive with 214K jobs added, lower unemployment rate, higher participation rate and revised up figures for the number of added jobs in previous months. But this report came a bit shorter than expected and thus seems to be enough to bring back up gold and silver and drag down USD. This may have just been another reason to clear some winnings off the table for USD bulls and bullion sorter sellers. In any case, this doesn’t change much the picture for gold and silver – the labor market is still improving at a slow pace.
This week, the JOLTS report will be release and could provide additional information regarding the progress of the labor market. This report seems to have a smaller impact on the bullion market than the NF payroll. In any case, the current expectations are for a fall in the JOLTS to 4.75 million – in the previous month the number stood on 4.84 million. If the number of job openings does fall below the current projections, this may provide additional pull up for gold and silver.
Besides the U.S. JOLTS, retail sales and consumer sentiment reports will be released. These are additional reports that could impact the direction of the U.S. dollar.
In Europe, the EU GDP for the third quarter – first estimate – will be published. In the UK the claimant count change and quarterly inflation letter will come out. These reports could impact the Euro and GB Pounds, respectively, if they show major changes. As such, their effect on gold and silver is likely to be limited.
In China, the CPI and industrial production will come out. The progress of China’s economy is another factor to consider its impact on the demand for commodities including gold and silver.
In the meantime, the demand for gold as an investment took another tumble — gold hoards in the GLD ETF, the world’s biggest gold ETF dropped to 727.151 tons by the end of last week –a 1.9% drop from the previous week and it’s also down by 5.2% since the beginning of last month. This is another indication that the demand for gold as an investment has been diminishing.
The U.S. dollar bounced back mainly against the Japanese yen – 3.9% during the past week. This came after BOJ announced a rise in its asset purchase program. If the U.S. dollar keeps recovering, it’s likely to bring back down gold and silver.
Finally, the U.S stock market’s rally slowed down as the S&P500 added only 0.7% to its value during last week. If the U.S equities resume their recovery, this may coincide with precious metals prices’ decline.
My guess: The recent recovery of gold and silver won’t last long and we could see precious metals resume their downward trend at a slower pace in the near term. If the upcoming JOLTS and retail sales report fail to reach the market expectations, this could contribute to a short term recovery for gold and silver when these reports come out but this rally, as stated before, won’t hold up for a long while.
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