Gold and Silver Outlook for February 9-13

Gold and silver didn’t perform well again in the past week, and the recent NF payroll report provided additional thrust to bullion’s descent. U.S. treasury yields, which tend to have a negative relation with the prices of precious metals, started to come back up in recent weeks, and thus coincided with the latest fall of gold and silver. This week, the JOLTS, retail sales, and consumer sentiment are the main U.S. reports. In Europe, fourth quarter GDP, BOE inflation letter, Euro group meetings, GB manufacturing production, and French industrial production are, just to name a few, the events and reports for the week. China’s new loans and CPI reports will come out. Here is a preview for February 9th to 13th, 2015:  

Last week’s non-farm payroll report was better than expected and led to a pull back in the prices of both gold and silver, as presented in the table below.

U.S.Labor Reports gold price and silver prices Feb 6 2015

The result of this report is one more factor to bring the FOMC one step closer towards raising rates. After all, the employment situation continues to improve and this time wages have gone up by 2.2%, year over year. This was, most likely, driven by annual wage updates, rise in minimum wage in certain states and end of the year wage negotiations.

The implied probabilities derived from the bond yields have gone up in recent weeks and suggest the market puts higher chances of a rate hike in the middle of the year. The rate hike is one of the main factors that are likely to drive down gold and silver prices. Albeit the developments outside the US including the economic slowdown in EU and Asia could drive down real interest rates, which is likely to positively impact bullion.

This week, the U.S number of job openings for January will be release and will provide anther indication for the progress of the U.S. labor market. Last month’s report regarding December showed the number of jobs opening reached 4.97 million; current market expectations are for the number to rise to 5.03 million. If the JOLTS report shows another higher than expected gain in job openings, this could be another indication for the progress of the U.S. labor market. Even though this report is monitored by the FOMC, the market doesn’t tend to react much to this news.

By the end of last week, gold holdings in the GLD ETF spiked again to 773.3 tons– 2% gain, week over week; it’s also up by 8.5% for the year, up to date.

Final note

The fall in gold and silver in recent weeks has cut their gains from the beginning of the year to only 4.2% and 7.1%, respectively. The latest shift in the market, in which, the progress of the U.S. economy and the growing chances of the FOMC to raise rates in mid-2015 has offset the global economic slowdown, has started to weigh on the recovery of gold and silver. If this trend persists – i.e. the labor market keeps showing recovery and U.S. treasury yields continues to rise – the price of gold and silver could resume their descent.

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