The big event of the week will be the aftermath of the Greek referendum — the results are in: 61% voted “No” against the bailout terms of the EU. Besides the Greek Drama, last week the non-farm payroll report was close to market expectations and as such had little impact on gold and silver prices. This week’s main event, besides the fallout from the Greek vote, is the release of the minutes of FOMC meeting – this could move the needle on whether the Fed is preparing for a rate hike this year. Other U.S. events or reports to consider: Non-manufacturing PMI, JOLTS, and Yellen’s speech. In Europe, besides the Greek bailout vote, which is likely to crowd out any other report/event, we have: GB manufacturing production and German factory orders. In China the new loans and CPI reports will be released. Finally, in Australia the RBA will have a rate decision. Here is a preview for July 6-10, 2015:
The non-farm payroll report didn’t offer too much drama with a gain of 223,000 – in line with market estimate, but a closer look revealed it wasn’t too impressive: The participation rate slipped to 62.6% and the average hourly wages didn’t move and was only 2% higher than last year. These figures don’t vote well for the progress of U.S. labor market. Moreover, since the U.S. inflation is still down, the odds of a rate hike in 2015 are still low.
Source: Bloomberg, BLS
But for the initial market reaction, gold and silver didn’t move much following the news about the labor report.
As of the end of the previous week, the implied probabilities in the bonds market declined: The probability of a rate hike in September slipped to 12% and for December — 47%. The upcoming minutes of the FOMC meeting could push the odds of a rate hike: Another dovish minutes could bring down the odds, which play in favor for gold and silver albeit aren’t likely to move bullion prices by much. The Greek debt crisis could also play a small role in moving the probability of a rate hike down if the crisis continues and a Grexit were to become more plausible – the FOMC could push forward the rate hike to 2016.
By the end of last week, gold holdings in the GLD ETF slipped by 0.25% to 709.65; The ETF’s gold holding are down by only 0.37% for the year, year-to-date.
Bottom line
The minutes of the recent FOMC meeting aren’t, as usual, likely to offer much more insight about the rate hike and could keep us guessing about the timing. For now, the prices of gold and silver remain range bound and are likely to remain so. Even if the Greek note “No” on the bailout and could move a bit closer towards exiting the EU, it’s still, IMHO, not enough to push the FOMC from pushing the rate hike. It could influence the FOMC members as it’s a factor, but not a crucial one. The economic data, however, aren’t too promising and they could the ones tilting back the scale towards pushing the rate hike to 2016 and keeping gold and silver in their current range.
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