Friday May 27, 2016 12:58
(Kitco News) - It's been a tough week for gold and next week's barrage of economic data and Federal Reserve speakers will be closely monitored as the market assesses the chances of a rate hike in June. Prepare for a data heavy week. Markets may be tugged back and forth intra-week with volatile trade, but everyone will be waiting for Friday.
Currently, Gold is heading for its third weekly negative close after prices fell to an eight week low. June Comex gold prices last traded at $1,213.70 an ounce, down $6.70 on the day.
"Rate hike chatter in the U.S. has acted as a headwind to gold over the past few days and continued hawkish commentary could provide some downward pressure on the metal," says Andrew Chanin, CEO of PureFunds, which offers the PureFunds ISE Junior Silver ETF (SILJ).
Here are five factors that could move gold next week. Some are run of the mill, but a few may surprise you.
Jobs data expectations: BNP Paribas forecasts a disappointing payrolls number at 110,000. "We think May payrolls could be weak and if we’re right, this would likely spark concern about the domestic outlook and foil the Fed’s hopes for a mid-year hike," BNP economists said in a GlobalMarkets research note.
Another view:Capital Economics says their econometric model points to a 170,000 non-farm payroll gain. But, allowing for the impact of the Verizon strike and other temporary factors "the actual gain in employment was probably as low as 120,000," the firm said.
Why it matters to gold: Will the Fed get the green light to hike at its June 15 meeting, or will economic data force them to wait until July? Caveat: the Brexit vote is June 23. Could the Fed hold off until July just in case the UK withdraws from the EU, which could trigger a spike in global market volatility?
Big picture: investor interest in precious metals remains high. "We have noticed an increase in activity in our Junior Silver ETF (SILJ) year-over-year in both volume and inflows. Investment demand has potential to put some precious metals in a severe shortage. These potential supply issues could get worse if more negative rate debt is issued making an asset yielding zero, such as precious metals, more desirable by comparison. If economic uncertainty and easy money policies persist, precious metals may be a beneficiary," Chanin explains.
Who's going to the beach? Reminder: US. markets are closed on Monday in observance of the Memorial Day holiday.
Could be a snore: The European Central Bank (ECB) meets June 2, with a press conference. Draghi is expected to reaffirm the bank is in a wait and see mode.