Gold and Silver Report 15 June 2015

Gold saw some support this week due to a softer dollar and uncertainty over Greek negotiations, but declined sharply after strong U.S. economic data strengthened the image of an improving U.S. economy and impending rate hike.

Start of Week Price and Charts snapshot:

Source: bloomberg

Source: NASDAQ

On Monday gold trickled up slightly after last week’s losing streak, as the U.S. dollar and stock markets fell, but stayed close to an 11-week low due to the impact of last week’s strong U.S. jobs report.^[1] On Tuesday the yellow metal rose again as European stock markets fell due to another uncertain staggering point in Greece’s debt negotiations, and weak Chinese economic data.^[2] On Wednesday, gold hit a one-week high of $1,192.10, thanks to a softer U.S. dollar, but gains remained limited as investors awaited an upcoming U.S. Retail Sales report to hit the market.^[3] On Thursday, gold prices fell after strong U.S. retail sales data lifted stock markets and the greenback rose, strengthening expectations the Federal Reserve will raise interest rates soon.^[4] On Friday, gold held the overnight losses, hurt by impressions of a strengthening U.S. economy and bolstered prospects of higher interest rates.^[5]

The U.S. economy and the prospect of a rate hike this year were usual influences on metals prices this week. Many expect gold to further decline due to strong U.S. economic data; Commerzbank analyst Daniel Briesemann said “Strong U.S. data is a further sign that the U.S. economy is improving… if we get further good data and the dollar appreciates, we wouldn’t rule out a fall to [USD]$1,100 over the next couple of months until the Fed starts raising interest rates”.^[6] While Afshin Nabavi of MKS said “I don’t think the fall in gold is over,” said. “We’re not seeing any kind of real interest on the physical front, so for me it points to an eventual breach of $1,150.”^[7] While the date of a possible U.S. interest rate hike is a hot topic, “It’s not a matter of whether they raise rates this fall or whether it’s in the spring, it’s just the fact that they’re going to raise them,” said Bill Baruch of iiTrader.^[8]

Meanwhile the continued wavering Greek negotiations have caused some support for gold prices. This week, European Union officials said that Greece’s reform proposals to unlock new funding to ward off a debt default fell “well short”. As HSBC analyst James Steel said “Bullion found support from renewed Greek debt concerns,” but added “That said, Greek exit concerns have clearly had a less robust impact on gold than during the earlier periods of ‘Grexit’ concerns.”