Gold traders will have plenty on their plate next week with
central-bank meetings and an always-important U.S. employment report,
while also continuing to keep tabs on the strength of demand in the
physical market.
The U.S. Federal Open Market Committee and
European Central Bank meet. And, as always, traders will be watching
economic data to see whether conditions are improving or deteriorating
so they can gauge for themselves what officials may do with monetary
policy down the road.
Traders also will keep monitoring reports
about the voracious physical buying that was unleashed by a sharp price
decline in mid-April. Some analysts have described this as pent-up
demand in which buyers pounced when presented with lower prices. This
helped
gold price rise for the week.
“The key for me is I want to see on these
accelerated prices if that physical buying is going to continue, or if
it’s price sensitive and is going to subside,” said Kevin Grady,
president of Phoenix Futures and Options.
June gold finished with a gain for the week of
$58, or 4.2%, to $1,453.60 an ounce on the Comex division of the New
York Mercantile Exchange, helped by bargain hunting, particularly as
the market took notice of the strong physical buying. The
technical-chart posture also improved. In fact, the June contract has
now risen in seven of the nine sessions since the historic sell-off of
more than $200 an ounce earlier this month. May silver gained 79.8
cents for the week, or 3.5%, to settle at $23.758.
In the weekly Kitco News
Gold Survey,
out of 35 participants, 24 responded this week. Fourteen see prices
up, while eight see prices down, and two see prices moving sideways or
are neutral. Market participants include bullion dealers, investment
banks, futures traders, money managers and technical-chart analysts.
The
FOMC meets on Tuesday and Wednesday. When
gold first faltered early in the year, improving economic conditions
had many financial-market participants thinking about an eventual FOMC
withdrawal of the bond-buying program meant to push down long-term
interest rates, referred to as quantitative easing. But much of the
economic data for March was softer than expected, which, if it
continues, likely would mean increased expectations for continued QE.
The soft March U.S. data included a rise of
just 88,000 in non-farm payrolls and 0.4% decline in retail sales. A
report on Friday showed the U.S. economy grew 2.5% in the first
quarter, below forecasts mostly around 2.9% to 3%.
Traders will find on May 3 out if the labor
market has picked up, when the Labor Department releases the April
report. Consensus forecasts call for a rise of around 160,000 to 166,000
in non-farm payrolls, with the jobless rate expected to remain at
7.6%.
“The last time, we expected 195,000 new jobs
and it was only 88,000,” Grady said. “So the jobs number is going to be
paramount.”Some of the other key U.S. economic indicators
next week include personal income and spending Monday, Chicago
Purchasing Managers Index and consumer confidence on Tuesday, ADP
private-sector employment report and Institute for Supply Management
manufacturing PMI Wednesday, and initial jobless claims Thursday.
Meanwhile, the European Central Bank’s
governing council meets Thursday. Recently disappointing economic news
in the 17-nation eurozone fueled expectations that the bank may cut
interest rates further from the record low of 0.75%. If so, this could
pressure the euro, which could impact gold due to its inverse
correlation with the U.S. dollar.
“After the disappointing string of economic data over the past couple
of weeks, the conditions set out by the ECB for a further easing in
rates have likely been fulfilled,” said Alex Thorndike, senior trader
for precious metals and foreign exchange with MKS Capital. “Many
economists have now changed their tune from earlier in the year
expecting a 25(-basis-point) cut in the main refinancing rate at the
May meeting, but no change to the deposit rate.”
Meanwhile, traders will also keep tabs on the
physical market. Demand for coins and bars worldwide has soared since
the mid-April price plunge, which has helped unleash demand, a number
of analysts have said. U.S. Mint gold bullion coin sales have hit
203,500 so far in April, the most of any month since December 2009.
“The reaction of the people (to the gold
sell-off) was to start buying,” said Chris Blasi, CEO of Neptune
Global Holdings. “The fundamentals of gold and silver haven’t changed.
The global economy is still weak; banks are still printing money. The
break gave people a chance to add to their positions. Now as gold
climbs, you might start to see the momentum traders come in, which helps
gold go higher.
“If we see a pullback, people who were buying
before might come back in and buy again to buy it cheaper.
The only
thing that might be not so good for gold is if prices went flat. There
are some people…who are waiting for a pullback. They’ve put half their
money in, but are holding back for a $25, $30, $50 break. If we do pull
back to the lows from last Tuesday (the $1,321 area), it’s going to be
less shocking. When prices fell as hard as they did at the time, it
was shocking.”
The mid-April price decline also came at a key
period for seasonal demand due to spring weddings in India, as well as
the May 13 Akshaya Tritiya festival, auspicious for gold buying.
Buying surged there and in other emerging-market nations.
However, some observers also caution that a
three-day holiday in China next week could at least temporarily curb
some of the global buying. China is the world’s second-largest consuming
nation, behind India, according to World Gold Council data.
“What I would be a little wary of is when they
do go on holiday, a significant amount of demand will be pulled from
the market and could induce bigger players to step in and sell,”
Thorndike said. “Without the cushion of SGE (Shanghai Gold
Exchange)/Chinese demand, we could swoop lower.”
Traders will also look closely at the most
recent release of the Commodity Futures Trading Commission’s weekly
commitments of traders data, said Bob Haberkorn, senior commodities
broker with RJO Futures. The report is released late on Fridays and
shows how speculators are positioned as of the previous Tuesday. Should
the data show fresh buyers returning to the market, this would be a
bullish sign, he said.
“Are there new longs coming into the market?”
he asked rhetorically. “Is this (recent rally) a short-covering move?
It could be a combination of both.”As always, technically oriented factors could accelerate any moves.
"I think we're going to consolidate next
week,” said Charles Nedoss, senior market strategist with Kingsview
Financial. “It closed nicely over the 10-day (moving average) and
consolidated there. It got a little ahead of itself at the 20-day
(moving average).”
As of the Comex pit-session close, the 10-day
average for June gold stood at $1,408.90 an ounce, while the 20-day was
at $1,486.60.
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