The recent rally of gold and silver coincided with the pull back in U.S. dollar. The latest JOTLS report didn’t meet market expectations but was still very good overall after considering the headlines. This week, the main even will be the minutes of the FOMC meeting. Other U.S. reports to be published include housing starts, existing home sales, CPI and PPI. In Europe the German economic sentiment, EU manufacturing PMI, GB CPI will be released, and MPC monthly meeting will take place. In Asia, BOJ will convene again and Japan’s GDP report for the third quarter and China’s manufacturing PMI will come out. So let’s review the economic outlook for the week of November 17th to 21st:
The U.S. labor continues to show slow signs of improvement. The recent JOLTS and NF payroll reports, however, didn’t meet market expectations. This was enough to bring back up gold and silver prices and curb down the U.S. dollar.
This week, the minutes of the FOMC meeting will be released and is likely to take center stage. Following last month’s meeting, in which the FOMC ended QE3 and the general tone was more hawkish, this time the minutes might balance out and carry a more dovish tone. This was the case in certain situations in the past. But it’s not a clear cut prediction.
Keep in mind, in the last meeting there was one dissenter, who is considered dovish.
The minutes will reveal whether there are more FOMC members that are a bit more dovish than the statement suggests.
Besides the minutes, several other reports will come out including CPI, PPI, housing starts and existing home sales. For the CPI report, the current expectations are for the CPI to drop by 0.1% and the core CPI to pick up by 0.2%.
In Europe, the EU manufacturing PMI will be released this week. In the UK CPI and retail sales reports will be published. The BOE will also convene again. There aren’t expectations for major headlines from this meeting and the rate hike is still expected next year.
During last week, gold hoards in the GLD ETF, the world’s largest gold ETF, declined to 720.615 tons by the end of previous week –a 0.9% fall and it’s 6.7% lower than the end of September. The ongoing fall in the gold hoards of GLD is another indication for the fall in demand for gold.
The U.S. dollar also changed course and declined against the Euro and Aussie dollar, but it continues to rally against the Yen. If the U.S. dollar were to resume its rally against other currencies, this could keep down gold and silver.
Finally, the U.S stock market didn’t do much as the S&P500 edged up by only 0.4%. The progress of the U.S. stock market is another factor that could impact the direction of bullion prices.
Takeaway
The bullion market pulled up and could see some additional gains if the FOMC meeting minutes does turn out a bit more dovish than expected. This could allow more people to take more profits on U.S. dollar and close short positions on precious metals. But the general direction is likely to be downward again.
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