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Gold / Silver / Copper futures - weekly outlook: August 8 - 12

Published 07/08/2016, 11:39
Updated 07/08/2016, 11:49
Gold ends the week lower as robust U.S. jobs report fuels Fed rate hike bets
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Investing.com - Gold prices plunged to a one-week low on Friday, after data showed the U.S. economy created more jobs than expected in July, raising the probability of an interest rate hike from the Federal Reserve in the coming months.

Gold for December delivery on the Comex division of the New York Mercantile Exchange sank to a daily low of $1,340.40 a troy ounce, the weakest since July 29, before settling at $1,344.40 by close of trade, down $23.00, or 1.68%.

The U.S. economy added 255,000 jobs last month, well above expectations for 180,000, the Labor Department said on Friday. June’s number was revised up to 292,000 jobs compared with the previous estimate of 287,000.

Meanwhile, the unemployment rate held steady at 4.9%, as more people entered the labor market.

The report also showed that average hourly earnings rose month-on-month by 0.3%, beating expectations for a 0.2% gain. They were up 2.6% on the year.

The upbeat data reignited speculation that the Federal Reserve will lift interest rates this year. Fed funds futures are currently pricing in a 15% chance of a rate hike by September. December odds were at around 44%, up from 33% ahead of the report.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, surged to a one-week high of 96.50 in wake of the stronger-than-expected jobs report. It was at 96.19 by late Friday, up almost 0.5% for the day.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

For the week, gold slumped $13.10, or 0.96%. The yellow metal flirted with a more than two-year high above $1,370 just a few days ago as a string of disappointing U.S. economic data prompted market players to push back expectations for the next U.S. rate hike.

Gold is sensitive to moves in U.S. rates. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.

For the year, the precious metal is up nearly 26%, boosted by concerns over global growth and expectations of monetary stimulus.

Also on the Comex, silver futures for September delivery tumbled 62.6 cents, or 3.06%, on Friday to settle at $19.81 a troy ounce. On the week, silver lost 63.5 cents, or 1.12%.

Elsewhere in metals trading, copper for September delivery inched down 2.0 cents, or 0.92%, on Friday to end at $2.154 a pound after touching a session low of $2.150, a level not seen since July 12. For the week, New York-traded copper prices slumped 7.4 cents, or 3.02%, the second weekly loss in a row.

In the week ahead, investors will continue to focus on U.S. economic reports to gauge if the world's largest economy is strong enough to withstand a rate hike in the coming months, with Friday’s retail sales data in the spotlight.

Meanwhile, China is to release what will be closely watched trade and inflation data amid ongoing concerns over the health of the world's second biggest economy.

Elsewhere, Germany is to publish preliminary data on second quarter economic growth on Friday for further hints on the strength of the euro zone's economy.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Wednesday as there is no relevant data on this day.

Monday, August 8

China is to publish a report on the trade balance.

Tuesday, August 9

China is to produce data on consumer and producer price inflation.

The U.K. is to publish data on industrial and manufacturing production as well as a report on the trade balance.

Thursday, August 11

Financial markets in Japan will remain closed for a national holiday.

The Reserve Bank of New Zealand is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The announcement is to be followed by a press conference.

The U.S. is to release the weekly report on initial jobless claims.

Friday, August 12

China is to release data on industrial production and fixed asset investment.

Germany is to publish a preliminary estimate on second quarter gross domestic product.

The U.S is to round up the week with a string of reports on retail sales, producer prices and a preliminary look at consumer sentiment.

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