The prices of precious metals took another beating especially after the NFP payroll report was released on Friday and exceeded market expectations. The JOLTS, retail sales, PPI and consumer sentiment are the main U.S. reports to be released this week. In Europe, Euro group meetings, GB manufacturing production, and French industrial production are among the main events and reports. China’s new loans, industrial production and CPI reports will also be published this week. Here is an outlook for March 9th to 13th, 2015:
Even though the NFP report was better than expected, the U.S. labor market has more room for improvement especially in terms of wages. The recent report showed a gain of 1.9%, year over year.
The table above presents the changes in the labor market and the reaction of gold and silver prices. As the labor market continues to improve, however, the chances of the FOMC hitting the rate hike button are picking up.
Based on the recent developments in the U.S. bond market, the implied probabilities, have risen to 45% chance of a rate hike in July and 66% of a rate gain in September. These numbers are higher than the probabilities recoded in the previous week.
Following the release of the non-farm payroll report, the JOLTS report will be release – another report that provides an update on the number of job openings, among other data. This report tends to have a lesser impact on bullion market, compared to the NFP report, but this is still a report that the FOMC closely follows – as it provides another indication for the direction the labor market is heading.
Besides this report, other U.S. economic reports that will be published this week include retail sales, consumer sentiment and PPI. If these reports show the U.S. economic activities are heating up, they could contribute to the weakness of gold and silver.
The weakness in the gold market has already started to steer away bullion investors from this precious metal: by the end of last week, gold holdings in the GLD ETF tumbled down by 2% to 756.32; despite the recent fall in this ETF’s gold holdings, its holdings remain up by 6.2% for 2015, up to date.
Where gold and silver are heading?
Following the recent developments in the U.S. including the strong NFP report, the dovish tone of Janet Yellen’s testimony, the growth in wages all point towards a potential rate hike in the coming months. The recovery of the U.S. dollar is another development that keeps dragging down bullion prices. For now, gold and silver are on the ropes and unless the market sentiment chances course – perhaps a few economic reports from the U.S. showing slower than expected growth — bullion prices are likely to resume their slow descent.
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