The weakness in the U.S. dollar didn’t gold and silver that kept coming down, as they have reached their lowest level this month. Will gold and silver change course again this week? The FOMC could shake things up for bullion investors especially if the FOMC turns a bit more dovish again. Besides the FOMC’s statement the first estimate of the U.S. GDP for the first quarter will come out this week and could also move the bullion market. Besides these two main evens of the week, other reports and events to consider include: GB first quarter GDP, U.S. and GB manufacturing PMI, U flash CPI, EU Monetary developments report, U.S. core PCE, UoM consumer sentiment, China’s manufacturing PMI, BOJ’s monetary policy meeting and BOJ’s economic outlook. Here is an outlook for April 27th to May 1st, 2015:
Even though the U.S. dollar took another hit against the Euro, Yen and Aussie dollar, gold and silver took another dive during last week. This could all change, however, if the FOMC continues with its recent line of dovish remarks. A reminder: In the previous statement the sentiment was leaning towards the doves, albeit the minutes of the meeting came across a bit more hawkish – by doing so it balanced out the statement.
Source of data: Bloomberg and FOMC’s website
This time, however, there is no press conference or update to economic outlook so the market isn’t likely to react to this news item as it did last time. The wording of the statement will matter and all eyes will on the FOMC’s release on Wednesday to see if there is any change to policy or any change in the wording of the statement. Currently, the markets project no chance of a rate hike this time. Are they still planning to raise rates this year? Last time, the FOMC revised down the projections for the cash rate’s level by the end of the year.
Besides the FOMC statement, the GDP report for Q1 – first estimate – will also come out on Wednesday. The current estimates are for 1% gain in the last quarter. If the report comes short of these current estimates, the FOMC could take a stronger dovish tone and it could signal that the low rates will remain for a longer time. In such an event, it could put a bit more wind into precious metals’ sails, even if for a short time.
Other reports worth noticing this week include: U.S. PCE and core PCE, EU CPI, U.S. pending home sales, and U.S. manufacturing PMI. These reports could move the U.S. dollar and Euro and, in turn, push gold and silver prices.
Even though long term treasuries yields rallied in recent weeks, they are still slightly down for the month of April: 10 year yields reached 1.93% — they are only 0.01 percentage points below their levels recorded at the beginning of the month. Moreover, 20 and 30 years treasuries yields are actually up for the month. Based on recent developments in the bonds market, the implied probabilities of a rate hike have slipped to 9% for July and 26% for September, based on CME’s estimates.
By the end of last week, gold holdings in the GLD ETF rose again to 742.347 – a 0.44% gain compared to last week; The ETF’s gold holding are up by 4.22% for the year, up to date.
Will gold and silver recover?
The bullion market hasn’t done well in the past several; this could change in the coming days — mainly if the U.S. economy doesn’t show signs of progress, and if the FOMC releases another dovish statement. The recent weakness of the U.S. dollar didn’t help gold and silver and for now very long term treasuries yields (20-30 years) are still up for the month, which could be enough to drive down gold and silver. But if the FOMC hints that a rate hike could occur later rather than sooner, this could be enough to drive back up, even for a short period of time, precious metals prices.
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