18/06/2024: The Week Ahead in Gold & Silver Markets:
Last Week’s Price Action:
Gold closed the week 1.68% higher at $2,333 per ounce. This was boosted by an increased expectation in lower interest rates this year following cooling inflation data.
Silver closed the week 1.29% at $29.56 per ounce and was influenced by the same factors as gold.
Introduction:
As we delve into another week filled with pivotal economic data and central bank decisions, gold and silver investors remain attentive to the potential market-moving events on the horizon. Here’s a comprehensive look at this week’s key news releases and their potential implications for the precious metals markets:
Tuesday: EU CPI Data
- EU CPI (Y-o-Y):
The year-on-year Consumer Price Index (CPI) for the Eurozone was released earlier, coming in at 2.6%, as expected. This marks an increase from the previous month’s 2.4%. Higher inflation in the Eurozone means the ECB may be cautious in cutting rates again. The Central Bank lowered rates by 0.25% recently, while also providing cautious commentary regarding inflation expectations. Due to this, gold & silver may be support gold and silver prices as investors seek hedges against inflationary pressures.
- EU CPI (M-o-M):
The month-on-month CPI also met expectations, registering at 0.2%, down from the previous month’s 0.6%. While a lower month-on-month figure suggests easing inflation in the short term, the year-on-year increase underscores persistent inflation concerns, which can be bearish in the current climate for precious metals.
Wednesday: U.K. CPI (Y-o-Y):
- U.K. CPI (Y-o-Y):
On Wednesday, the U.K. Consumer Price Index is expected to come in at 2%, down from the previous month’s 2.3%. A lower CPI figure suggests cooling inflation, which could increase the likelihood of the Bank of England (BOE) to cut rates sooner. This scenario could support gold and silver prices as lower interest rates decrease the opportunity cost of holding non-yielding assets like precious metals.
Thursday: BOE Interest Rate Decision and U.S. Initial Jobless Claims:
- BOE Interest Rates:
The Bank of England is expected to keep interest rates unchanged at 5.25%. Stability in interest rates can lead to a stronger pound if investors had anticipated cuts, potentially limiting the upside on gold and silver prices in GBP terms.
- U.S. Initial Jobless Claims:
Initial jobless claims in the U.S. are expected to come in at 235,000, down from the previous week’s 242,000. A lower figure indicates a strengthening labor market, which can be negative for gold and silver as it might support a stronger dollar and higher interest rates. Conversely, higher-than-expected claims would suggest economic weakness, potentially increasing demand for safe-haven assets like gold and silver. In today’s economic environment, Central Banks are looking to indicators for an excuse to cut rates.
Friday: U.S., EU, and U.K. PMI Data Releases:
- U.S., EU, U.K. Manufacturing PMI:
The U.S. Manufacturing PMI is expected to come in at 51, slightly down from the previous reading of 51.3. In the EU, it is expected to come in at 48, up from the previous month’s 47.3. In the U.K., the figure is expected to come in at 51.3, up slightly from 51.2
.A PMI above 50 indicates expansion in the manufacturing sector, which can be a sign of economic strength. However, any downward revision might increase uncertainty and support gold and silver prices.
- U.S., EU, U.K. Services PMI:
U.S. Services PMI is expected to come in at 53.4, down from 54.8. A decrease in the services sector’s growth rate might suggest economic slowing, potentially increasing demand for gold and silver as safe-haven investments.
In the EU, the figure is expected to come in at 53.5, up from the previous month’s 53.2. Continued growth in the services sector could reduce immediate demand for safe-haven assets.
In the U.K., it is expected to come in at 53, up from the previous month’s 52.9. Steady growth in the services sector suggests economic resilience, which might weigh on precious metals unless broader economic risks are highlighted.
Conclusion:
This week’s economic data releases and central bank decisions provide crucial insights into inflation trends, economic growth, and labor market conditions. Lower-than-expected inflation figures and dovish central bank commentary could support gold and silver prices by increasing expectations for interest rate cuts. Conversely, signs of economic strength and persistent inflation might weigh on precious metals by supporting a stronger dollar. Stay tuned for our next update as we continue to monitor these developments and their impact on the gold and silver markets.