Gold Price made modest gains this week but the week ahead promises a bigger move
San Francisco (Jun 12) Gold inched higher in the past week, gaining 0.72%. It's the first weekly gain after three weeks of declines.
The rebound came after a fall to the lowest since mid-March last Friday.
What's disappointing was how small the bounce was. It didn't erase half of the previous week's decline and given the shallow bounce, it can hardly be considered a rejection of the bottom of the range since late-March.
But it gets even worse.
Gold generally correlates (inversely) with the US dollar. By any measure it was a tough week for the buck.
A strong non-farm payrolls a week ago set up the dollar for continued gains. It was followed up by a solid retail sales report on Thursday. Yet neither sustained any kind of rally.
At the end of the week, the New Zealand dollar was the only major currency that underperformed the USD. And that came as a result of a surprise rate cut.
What next for gold?
The week ahead is all about the FOMC rate decision on June 17 at 2 pm ET (1800 GMT). Earlier this year, this meeting was seen as the most-probable date for liftoff. A dismal first quarter changed that and the market assigns roughly a 3% probability to a surprise hike. The market is now focused on September, where that rises to about 30%.
Given the optimistic signals from Yellen and other Fed members, that may be low. The Fed will no-doubt continue to focus on data dependency but they also want to make markets believe that every meeting is a 'live' meeting and that may even extend to a the July 29 meeting, where there's only about a 7% chance of a hike priced in.
The worst thing that could happen for gold in the week ahead is a hawkish Fed. Yellen may not yet deliver but gold bulls will feel targeted and that will lead to early-week selling.