The recent NFP report came short of market expectations with only 126K jobs added in the past month. This report is likely to rekindle the hopes of a “later rather than sooner” rate hike by the FOMC – perhaps by the end of the year/next year. In the meantime, gold and silver investors are likely to benefit from this news as it could bring back up these metals’ prices. This week the main reports include: Minutes of the FOMC meeting, non-manufacturing PMI, JOLTS monthly update, RBA rate decision, EU retail sales, and China’s CPI. Here is a preview for April 6th to 10th, 2015:
The NFP report showed a gain of 126K after the job market grew by over 200K each month in the past half year. Some analysts suggested it’s due to harsh weather conditions and also the adverse impact of the low energy prices. This week, the JOLTS report will be released and will provide another indictor for the progress of the U.S. labor market. It’s more important to consider that if the coming reports show fewer job gains than in recent months, this could imply a change in trend. The slower the U.S. economy progress, the prices of gold and silver are likely to benefit via the FOMC’s policy – turning more dovish may help bring slightly up bullion prices. According the CME, the implied probabilities have fallen again to a 14% chance of a rate hike in July and 28% of a rate hike in September.
During last week, the U.S. dollar appreciated against leading currencies such as the Euro, Yen and Aussie dollar. If the U.S. dollar were to change direction again and fall; this could also pressure back up the prices of gold and silver.
This week the main report to be released is the minutes of the FOMC meeting from back in March. In the last meeting, the FOMC took down the patience term but had a dovish tone. Moreover, the dot plots show that the FOMC members project the rate at the end of 2015 will be lower than previously estimated. If this report shows FOMC members are less incline to raise rates anytime soon, this could bring back up gold and silver.
Other reports that will be published this week include: U.S. non-manufacturing PMI, China’s CPI, EU retail sales and Canada’s employment report.
By the end of last week, gold holdings in the GLD ETF remained unchanged at 737.2; even though the ETF’s gold holding have dropped in recent weeks, they are still up by 3.5% for the year, up to date.
What’s next?
Gold and silver are likely to start the week strong following the release of the NFP report. Finally, if the minutes of the FOMC meeting show another dovish tone as members become less incline to raise rate in the coming months; this could also bring back up gold and silver during the week.
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