3 Factors That Will Drive Gold Next Week ! Weekly Outlook: 3 Factors That Will Drive Gold Next Week
Friday June 03, 2016
https://www.kitco.com/news/2016-06-03/Weekly-Outlook-3-Factors-That-Will-Drive-Gold-Next-Week.html
(Kitco News) - June 3 –Global investors rushed back into the safety of gold this week, as shockingly weak U.S. employment data pulled the rug out from under a Fed rate hike this summer.
Gold prices surged over $30 per ounce intraday Friday, with June Comex gold futures recently trading at $1,240.20, up $30.40.
Rate hike expectations for the June meeting plunged to 4% on Friday, according to the CME Group's Fed Watch Tool, after non-farm payrolls grew by a meager 38,000 in May, the slowest pace in more than five years, and well below the 155,000 consensus view.
Next week: All Bulled Up
"I am now bullish on gold for next week, I think today is a major turning point for the trend in U.S. dollar and gold for the near term. Gold could remain in rally mode through the coming week as traders reassess their U.S. dollar and Fed outlook" -- Colin Cieszynski, chief market strategist, CMC Markets.
"I'm bullish on gold next week due to the recent economic data. Simply put -- buy any dips" -- Sean Lusk, director commercial hedging division at Walsh Trading.
Key Factors For Gold Next Week:
Yellen is speaking to the World Affairs Council of Philadelphia.
How will Yellen spin the bleak 38,000 job gain? Is the glass half empty or half full? "There are two ways of looking at the big drop in job growth, a weaker U.S. economy, or slowing growth because the economy is nearing full employment," Cieszynski says.
Trader Tip: use this link to watch the Yellen event live > https://livestream.com/accounts/19597364/events/5454178
How to trade it: "She could indicate whether the Fed remains on track for a June/July rate hike anyway or if the central bank is reconsidering. Stay-the-course talk could send the U.S. dollar back up and gold back down while a dovish or uncertain tone could keep the pressure on U.S. dollar and boost gold," Cieszynski says.
How to trade it: Watch for surprises or unexpected moves, and for changes in sentiment toward commodity markets precious metals.
- THE MAIN EVENT: Fed Chair Janet Yellen's speech on Monday, 12:30 ET.
- Central Bank Watch
- Reserve Bank of Australia (June 7) no change expected
- Reserve Bank of India (June 7) no change expected
- Reserve Bank of New Zealand (June 9) 0.25% rate cut expected
- Related Markets: The U.S. dollar, equities, the bond market and the energy sector. "Crude oil in particular but most importantly the action in the U.S. dollar will have an inverse reaction in gold," Lusk says. "The precious metals market will look to identify any anxiety investors have over the future of the economy. The market overall will be hanging on each and any Fed comment on any future rate hikes."
Looking ahead: Brace for Brexit vote June 23
"With the race looking like a dead heat and the fear machine cranking up each time the leave side gains any momentum, we could see significant capital flows in and out of defensive havens both before the vote and after the results," Cieszynski says.
The Long-Term View: Heard On The Street
Sol Palha, senior financial analyst at Tactical Investor:
"We live in a world where the main driving force behind this illusory economic recovery is hot money. Cut this supply and the economic recovery comes to an end. Central bankers are aware of this, and that is why they are embracing negative rates as it’s the only way to maintain this illusion. But, the million dollar question is for how long?" Palha says.
"Gold and silver bullion should be viewed as a form of insurance against a future financial disaster. We are taking about taking insurance against another financial crisis; that has the potential to be larger than the 2008 financial crisis," Palha says.
Buy Physical Metal on Dips
For those that have extra money that is not being put to use and patience, strong pullbacks can be used to add to your bullion position, Palha advises. "We tend to favor silver more than gold as the gains on a percentage basis will be far larger on silver than gold. We see gold trading to the $3300-$3500 ranges relatively easy once it manages to close above $2200 on a monthly basis. If there is a feeding frenzy and there usually is, then our absolute high-end target for gold is $5,000," Palha says.