Gold and Silver Outlook for June 1-5

The recent recovery of the USD provided the climate to bring back down gold and silver. Even the contraction in the US GDP during Q1 didn’t help pull up gold and silver, nor did the fall of long term treasury yields. Will gold and silver change course again? This week, the main events of reports that could move the bullion market include: ECB rate decision, NFP report, RBA rate decision, EU CPI flash estimate, U.S. factory orders, U.S. manufacturing PMI and non-manufacturing PMI. Here is an outlook for June 1-5, 2015:  

On Friday the second estimate for the GDP for Q1 was published and showed a drop of 0.7%, which was lower than expected. Nonetheless, the USD came back up mainly against the yen and commodities currencies – this trend brought back down bullion prices.

Looking forward, the main event of the week for the U.S. dollar and precious metals is the release of the non-farm payroll report, which will come out on Friday. Currently, the market estimates the report will show a gain of 226,000 – not far off the gain recorded last month. If the report were to show a lower than expected gain in number of jobs, this could bring back up gold and silver prices. A weaker gain in the number of jobs could tilt the scales back again for postponing the rate hike of the FOMC.

U.S.Labor Reports gold price and silver prices May 10 2015

Source: Bloomberg, BLS

The ECB will convene this week to decide on its monetary policy. Even though the ECB isn’t expected to change its policy, it’s still likely to move the markets; especially if ECB President Draghi were to make any major announcements or back down from its dovish rhetoric – something that isn’t likely for now. The market anticipates ECB were to keep moving forward with its QE program and its current pace. RBA and BOE will also have policy meeting but they too aren’t expected to make any changes at this point.

Other notable reports that could the markets include U.S. non-manufacturing and manufacturing PMI, factory orders, and EU flash CPI for last month. If the U.S. economic progress slows down, this could help bring back up gold and silver.

By the end of previous week, gold holdings in the GLD ETF inched up by 0.1% to 715.86; The ETF’s gold holding are up by 0.5% for the year, year-to-date.

As of the end of last week, the implied probabilities of a rate hike, based on the pricing of U.S. bonds, slipped to 23% in September and 57% in December – these figures are slightly lower than the previous week. These estimates are likely to keep moving up and down with no clear trend until the Fed makes a clearer statement about its intentions to raise rates this year.

Final note

The U.S. dollar so another rally, even though the recent GDP update showed a contraction in Q1. The volatility is likely to continue in the gold and silver market this week – mainly on account of the upcoming NFP report, which could bring back up bullion prices if the report shows another slow rise in jobs.

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