Author: Paul Ploumis
13 Apr 2015 Last updated at 03:17:01 GMT
(Kitco News) - Gold traders will be looking in a full cupboard of U.S. economic data next week as market participants try to figure out what policy-makers are likely to signal when they meet again at the end of the month.
Gold hit its strongest level in one and one-half months Monday after a weak report on U.S. non-farm payrolls, released on Good Friday when U.S. markets were closed, triggered ideas that the Federal Open Market Committee might hold off on tightening monetary policy for longer than previously thought. Over the course of the week, however, the yellow metal subsequently backed off the early-week highs.
Now, many of the other most widely followed U.S. reports are on the calendar for next week, including retail sales, industrial production, inflation and housing data. So participants in gold and other markets will assessing those reports as they try to form opinions on what Fed officials may do at an April 28-29 meeting.
They also will be keeping an eye on the type of demand that emerges in conjunction with a key Indian holiday later this month, as well as a mid-week report on Chinese economic growth, analysts said.
June gold surged to nearly $1,225 an ounce on Monday after a Good Friday report showed that March U.S. non-farm payrolls rose by 126,000, the first time they were below 200,000 in months.
"We’ve been very much responding to the latest print of the payrolls in the gold market,” said Bart Melek, director of commodity strategy with TD Securities. “They came in significantly below expectations. That has pushed back expectations of tightening.”
That tends to support gold several ways. It undermines the U.S. dollar, with traders often buying gold as an alternative currency when the greenback is weak. Also, if the Fed does not hike, this reduces the so-called opportunity cost of holding gold, or the interest earnings that an investor would have lost by holding a non-yielding asset like gold instead.
However, Melek said, Wednesday’s release of FOMC minutes was not as dovish as the market had hoped for, and gold pulled back. As of 1:30 p.m. EDT Friday, the June gold contract was trading at $1,204.70 an ounce on the Comex division of the New York Mercantile Exchange, although this was still up from the settlement of $1,200.90 eight days ago prior to Good Friday.
"We’ve got a ton of (economic) stuff out next week,” said Sean Lusk, director of commercial hedging with Walsh Trading. “The data will be the focus.”
No U.S. economic reports are on the calendar Monday, but Tuesday brings retail sales and producer prices, followed by the New York Federal Reserve’s Empire State manufacturing survey, industrial production and the Fed’s Beige Book on Wednesday. First-time weekly jobless claims, housing starts and the Philadelphia Fed’s business survey are on tap for Thursday, followed by the consumer price index and consumer sentiment on Friday.
Traders in stocks, bonds, the dollar, metals and other markets all will be trying to gauge what the reports collectively mean for future U.S. monetary policy.
"Based on what we’ve heard from the Federal Reserve, any action (by policy-makers) will be driven by data and inflationary expectations,” Melek said.
"Stronger data implies a Federal Reserve that is more likely to tighten, and weaker data a lesser likelihood….We expect the data to be a little weak. That means gold would look better from these levels.”
Lusk added: “Bad news is good for gold and vice-versa. At that the end of the day, it will be what the Fed says.”
Additionally, the market will be paying attention to comments from a number of Fed speakers next week, said Jim Comiskey, senior account executive with Archer Financial Services. The list starts with Minneapolis Fed President Narayana Kocherlakota on Tuesday, followed by St. Louis Fed President James Bullard on Wednesday morning.
"It’s awful hard to throw a dart as to how gold will trade next week,” Comiskey said.
"The market is going to continue to fixate on whether the Fed is going to raise rates in June, or aren’t they?” he said. “They know they’re data dependent, and the market does as well.”
Lusk and Comiskey also noted that the market will be tracking the amount of physical gold demand tied to the Akshaya Tritiya holiday in India, which is in the week after next. Such holidays tend to lead to increased purchases of the precious metal in the key gold-buying nation, although Comiskey commented that there are weather forecasts for a typhoon, which he said could curtail some of that demand. Still, Comiskey cited news reports of Indian demand doubling in March to 125 metric tons from 60 tons in the same month a year ago.
While much of the market’s economic focus will be on the U.S., traders also will pay attention to a Chinese report on economic growth, said Phil Flynn, senior market analyst with Price Futures Group. China’s first-quarter gross domestic product is due out Wednesday, with expectations for roughly 6.9% to 7% growth after 7.3% in the fourth quarter.
"It might be bullish for gold if it comes out a little bit weaker than anticipated,” Flynn said. “There is the growing possibility that China is going to have to continue to aggressively stimulate its economy.”
Courtesy: Kitco News