Precious metals traders will have three reports on the U.S. and global economy in the next week that could precipitate a continuation of the recent rally we have seen in gold and silver in the past two weeks.
ECB FRONT AND CENTER
Going forward it remains to be seen if the recent rally will continue and that may be dependent on three statements and releases in the next week. The first being Thursday’s ECB monetary policy committee meeting in Frankfurt.
At the meeting it is expected that the ECB and the monetary authorities will release details of a long awaited and much debated sovereign debt buying plan. The debate is whether ECB President Mario Draghi will adhere to current EU rules and agreements for the size of bond purchases by the European Central bank.
The debate will center on whether traditional treaties and accords like Maastricht that refrain from the ECB from sovereign debt purchases fully and completely, or will these be modified to have sovereign debts of peripheral countries like Spain, Italy, and Greece bought creating inflation that may be difficult to reel in for the EU.
We have seen that bond purchases by the Fed here in the U.S. have possibly influenced commodity prices like energy and precious metals, and we may see a similar influence overseas.
U.S. JOBS DATA
The second report traders have an eye on is Friday’s non-farm payroll report. Pre-report guesstimates have the non-farm payroll coming in around plus 125,000, with the private payroll forecasting to add 140,000 jobs. The unemployment rate is expected to be unchanged at 8.3 percent. Any major deviations to the pre-report guesstimates on Friday’s release could enhance or detract the possibility of adding additional stimulus by the Fed and possibly impact the presidential election in November.
U.S. FED MEETING
Thirdly, traders will obviously be watching next Wednesday’s communique and statement from the FOMC itself. Minutes from the last meeting revealed that more voting members were in favor for QE3, than at any time since QE2 ended.
GOLD ACTION
It is my contention that if the ECB adopts a bond buying program coupled with a disappointing jobs report that we could see gold trade at or near yearly highs near $1,800. If jobs come in line with expectations, along with a continued wait and see approach from the Fed, look for pullbacks back down to $1,635, and then possibly $1,590 in the December gold contract.
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