The Greek elections from the weekend could bring the Greeks one step closer to exit the EU, which may stir up the markets mainly the Euro. The result of the recent QE program announcement of ECB and BOC’s rate cut brought up the U.S. dollar against these currencies, but this didn’t drag down the prices of gold and silver. But the ongoing appreciation of the U.S. dollar could eventually curb down gold and silver’s recovery. Moreover, for gold and silver the main events for the week will be in the U.S. and include the GDP report for Q4 and the FOMC meeting. Here is a preview for January 26th to 30th, 2015:
Besides the Greek elections that could stir up the markets, the main event of the week will be the forthcoming FOMC meeting – it will be held on January 27-28. The statement will be released on January 28th, Wednesday.
FOMC meetings used to lead to a decline in the prices of gold and silver as the meetings tended to have a hawkish tone – mostly during 2014.
In the last statement, even though it did kind of omitted the term “considerable time”, it kept the term as a reference point to the FOMC’s current policy.
Following the last meeting, Chair Yellen also stated that the FOMC won’t make any changes to policy in the next two meeting – at the very least.
Some even think that the adverse impact of falling oil prices on the U.S. mainly in the oil industry will be more than offset by the positive effect of low oil prices on the progress of the economy. Moreover, the U.S. economy is still heading towards a good year in terms of GDP growth, according the latest outlooks provided by the IMF and World Bank.
So for now it still seems the FOMC will keep its plan to raise rates in the second part of the year. But perhaps there is now more doubt than in previous months of the FOMC actually follows through with this plan. After all the implied probabilities of a rate hike have gone down in recent weeks.
If the FOMC statement provides a more dovish tone, then this could keep driving up gold and silver prices.
In any case, this time, the current projections are for little change in the wording in the statement. So the statement will have limited impact on gold and silver.
Besides the FOMC meeting, the GDP for the last quarter of 2014 will also be released this week. If the U.S. economy keeps growing at a faster than expected growth rate – current estimates are at 3.1% — then this could also boost the U.S. dollar, which may actually bring down gold and silver.
Other reports worth taking notice this week include: China’s manufacturing PMI, U.S. new home sales, EU flash CPI, U.S. core durable goods, Canada’s GDP, U.S. consumer confidence and German retail sales.
By the end of previous week, gold holdings in the GLD ETF jumped to 741.646 tons– 1.5% gain; it’s also up by 4.1% for the year, up to date.
Final note
The recent recovery in gold and silver is likely to keep going, perhaps at a slower pace than in recent months, especially if the FOMC statement doesn’t offer any new insights about its future plans to raise rates and if the GDP for the fourth quarters shows a higher than expected growth rate. Finally, the aftermath for the Greek elections and the ECB’s QE program could keep drive down the Euro, which may also bring back up the U.S. dollar. The recovery in the U.S. dollar is likely to also curb down the rise in gold and silver.
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