Short Term seems positive for Gold

Gold rose by 15 dollars last week from $1229 to $1244 having hit a high of $1252 and a low of $1227. Silver rose by 41 cents from $17.36 to $17.77 having reached a high of $17.78 and a low of $17.33. The dollar index stands at 99.62 that’s down 0.68 on the week. Gold prices moved higher as the Euro gained traction and the dollar edged lower following stronger than expected German PMI data. Analysts believe that gold has further to rise but will be seesawing between $1230- $1260 before perhaps it breaks out up to $1280 levels.

Silver markets were also positive last week and is attempting to reach $18 level. Similar to gold we see a see saw effect between the price range of $17 where there is significant support and the $18 level where there is resistance. As I have mentioned in my previous blogs that political uncertainty could have a greater effect on prices primarily because of their effect on the value of the dollar which actually fell a little during the week. Also a fall in the Dow enabled funds to be moved out of equities and back into gold, though to be fair this transference was relatively small.

Gold prices finished higher on Friday to log a second weekly gain in a row as demand for assets perceived as risky waned and the U.S. dollar touched its lowest level in about seven weeks.
Traders also eyed developments tied to a Republican-backed U.S. health-care bill, which could have wide-ranging influence in financial markets.

The main focus globally was on a vote by the U.S. House of Representatives on a bill to abolish the Affordable Care Act, also known as Obamacare.  The vote was expected late Thursday, but was postponed by the Republicans when there were serious doubts the Republicans had the votes to strike down Obamacare. After negotiations between the Trump administration and members of the House Thursday, President Trump took a hard line and declared the vote should take place Friday, or he would move on to other matters and leave Obamacare in place. There is no clear consensus in the marketplace on the outcome of this key vote, which could move markets in its immediate aftermath.
A “no” vote on the House bill would likely favour the gold market bulls, as it could put downside pressure on the U.S. stock market.

Gold could back off and The U.S dollar is expected to strengthen and bonds yields should rise if the health care bill gets passed. The main reason being that the markets will see it as one hurdle out of the way for finally moving onto tax reform and other fiscal stimulus measures.

But if it happens otherwise and if the bill doesn’t get passed then gold is quote likely to rise.
On Friday, St. Louis Fed President James Bullard said U.S. labour market improvement is slowing down. U.S. data on core durable goods has shown that the economy is strong, but this is not something which is going to excite the Fed that much.

The U.S. data released was as follows

• The Department of Commerce said new order of durable goods increased by $3.9 billion or 1.7% to $235.4 billion last month, following January’s revised 2.3% increase. According to consensus forecasts, economists were expecting to see a 1.1% rise.
• Stripping out the volatile transportation sector, new orders of core durable goods rose 0.4%, in February, following January’s revised increase to 0.2%. Economists were expecting to see an increase of 0.5%.

The political uncertainties over in Europe around French elections and Brexit are going to provide a lot of tailwinds for the gold rally .

Analysts believe that the short term outlook for gold is positive as it will rise and shine amidst all the volatility and uncertainty prevailing. The coming week, US durable goods orders and housing sales will be announced. Globally reports on Japanese trade and UK inflation could also influence the currency markets and so it is possible that the dollar may lose a little ground against the Sterling and the Euro as it did last week. So this week we are positive for gold and silver while the limits mentioned are tested. What also needs to be focused is the divergence between the Fed’s growth forecast of 2% and President Trumps envisaged plans for a 4% economy growth rate. Time will tell which of the two proves to be more accurate.

The sentiments for Gold are bullish

Gold prices have fallen 5.3% from the end of February high and they have almost given back 50% of the December to February gains

Gold prices slipped towards week low on Thursday as investors awaited the employment report due on Friday, a factor that would unofficially strengthen the interest rate hike in the FOMC meet next week.

Gold’s latest pull down followed the release of better-than-expected US private jobs data midweek, boosting the dollar ahead of the release of official monthly payrolls figures on Friday.

• Private employment, which excludes government agencies, rose by 227,000 after a 221,000 increase the prior month. It was the biggest gain since July. Construction jobs, which can fluctuate depending on the weather, rose by 58,000, the strongest in almost a decade, and followed a 40,000 increase in January. Manufacturing payrolls gained 28,000, matching the most since August 2013. Meanwhile, retail positions fell by 26,000, the most in four years.

• The ECB held its benchmark refinancing rate at 0% and left the pace of its bond purchases unchanged on March 9th, as widely expected. Both the deposit rate and the lending rate were also left steady at 0.4% and 0.25%, respectively.

• The number of Americans filing for unemployment benefits went up by 20000 to 243000 in the week ended March 4th 2017, slightly above expectations of 235000.

• 2008 Nonfarm business sector labor productivity in the United States increased at a seasonally adjusted annual rate of 1.3 percent during the fourth quarter of 2016, following a downwardly revised 3.3 percent rise in the previous period and below market expectations of a 1.5 percent gain.

While unseasonably warm weather may have boosted the payrolls count, the data represent President Donald Trump’s first full month in office and overlap with a surge in economic buoyancy following his election victory. The figures also corroborate recent comments by Federal Reserve officials that flagged a likely interest-rate increase this month.

Bullion’s being pulled back down toward $1,200 an ounce in the worst losing run since October as positive US economic data underpinned expectations that interest rates could probably be raised several times this year, starting with a hike next week.

After raising rates just a single time in 2015 and also in 2016, the pace may quicken this year. The so-called dot plot from Fed policy makers shows an expectation for three increases this year, and last Friday, Yellen dropped hints the bank might end up having to hike them more than planned in 2017.

After Wednesday’s upbeat private payrolls data, markets were pointing towards more than 90 % chances of rate hike in March meeting; gold prices are likely to face the weakness amidst the strength in the dollar. Separately, the weaker CPI released from China is also likely to put pressure on gold, given the fact that gold is considered as a hedge against inflation.

Gold prices slipped on Friday, building on a loss for the week as better-than-expected U.S. employment data backs the likelihood that the Federal Reserve will decide to boost interest rates at its meeting next week.

Higher interest rates lift the appeal of holding dollars. That also means that a stronger dollar cuts the worth of holding non-yielding gold that’s priced in this denomination.

We see this sell-off as tied into the increased chance of a US rate rise next week. Looking further out, sentiments for the yellow metal are bullish.