The non-farm payroll brought further up the USD against leading currencies as it showed a rise of 280,000 jobs – higher than market estimates. This news is likely to resonate in the financial markets as it raises the odds of the FOMC taking a more hawkish stand in the next meeting on June 16-17. Besides the residual impact of the NFP, this week we also have: U.S. retail sales, JOLTS, consumer sentiment and PPI. In Europe, we have Great Britain manufacturing production and Germany’s industrial production. Finally, in Asia Japan’s GDP for Q1, China’s new loans and CPI will be released. Here is an outlook for June 8-12, 2015:
On Friday, the NFP report came out and was much better than expected. And since the deviation from market estimates tend to move precious metals, gold and silver, as you can see in the table below, came down on Friday.
Source: Bloomberg, BLS website
Moreover, the NFP also showed a total upward revision of 32K jobs for April and March. Rate of unemployment remained nearly flat at 5.5% and participation rate edged up to 62.9%.
Following the NFP report, the next jobs report that will be released this week is the JOLTS report that shows that changes in job openings. The current estimates are for the JOLTS to show a modest gain to 5.03 million in April. A gain in JOLTS could bring further up the USD and drag down gold and silver prices. This report is also followed by the FOMC and as such its members could consider the progress of the US labor market when they convene again this month for the next FOMC meeting. The implied probabilities in the bonds market, shows that the odds of a rate hike in September have risen to 31% and 67% in December. These figures could go even further up if the JOLTS show another gain.
Further, if the upcoming retail sales show a higher than expected growth, currently core sales are expected to rise by 0.7%, month over month, this could also bring further up the USD. The recovery of the USD and the bounce back in long term treasury yields are the right environment for gold and silver to see further losses in the near term.
Conversely, the recent trend could change course as the market is still on the fence of whether the FOMC were to raise rates this year. So keep in mind, it’s still far from a done deal, which means one thing – high volatility, including in gold and silver, is here to stay.
By the end of last week, gold holdings in the GLD ETF dropped by 1% to 708.7; The ETF’s gold holding are down by 0.5% for the year, year-to-date.
The ongoing rally of the U.S. dollar, the rise in interest rates are keep driving down the prices of gold and silver. If this trend persists, precious metals are likely to further fall – especially if the upcoming U.S. report including JOLTS and retail sales show better than expected results.
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