Gold / Silver / Copper futures - weekly outlook: May 2 - 6
New York (May 1) Gold prices soared to a 15-month peak on Friday, as a broadly weaker U.S. dollar and indications that the Federal Reserve was in no hurry to raise interest rates boosted the yellow metal.
Gold for June delivery on the Comex division of the New York Mercantile Exchange jumped to an intraday high of $1,299.00 a troy ounce, the most since January 2015, before paring gains to end at $1,290.50, up $24.10, or 1.9%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, crashed to 92.98 on Friday, a level not seen since August. It ended the day at 93.02, down 2.14% for the week, as a lack of action by the Bank of Japan and the cautious tone taken by the Federal Reserve earlier in the week continued to weigh.
The dollar dropped to an 18-month low of 106.28 against the yen on Friday, with the pair posting its biggest weekly percentage decline since the 2008 financial crisis in the aftermath of the Bank of Japan's decision not to ease policy further.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
For the week, gold prices rallied $57.60, or 4.92%, amid indications the Fed will take a slow and cautious approach to raising interest rates this year.
The U.S. central bank left interest rates unchanged following its two-day meeting on Wednesday and issued a statement implying it was in no hurry to raise rates.
Offering little hope of a move in June, the Fed said U.S. "economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate."
Data released Thursday revealed that the U.S. economy grew at an annualized rate of just 0.5% in the first quarter, its weakest pace in two years, while a report on Friday showed that U.S. inflation barely rose in March as consumer spending remained tepid.
The downbeat data makes it less likely that the Fed will be able to follow through on its projected two interest rate increases this year.
A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
Prices of the yellow metal are up nearly 22% so far this year as expectations faded that the Fed would move to normalize interest rates due to fears over the global economy.
Gold is sensitive to moves in U.S. rates, as a rise would lift the opportunity cost of holding non-yielding assets such as bullion.
In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report for April to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.
There is also ISM manufacturing data on Monday and ISM services on Wednesday. In addition, there are more than a half-dozen Fed speakers on tap for the coming week as traders search for more clues on the timing of the next U.S. rate hike.
Elsewhere in metals trading, silver futures for May delivery climbed 23.6 cents, or 1.34%, on Friday to settle at $17.78 a troy ounce after hitting a session high of $17.99, a level not seen since January 2015.
On the week, silver futures surged 88.9 cents, or 5.26%, tracking strong gains in gold. For the month, silver soared 15%.
Also on the Comex, copper for July delivery spiked 5.2 cents, or 2.33%, on Friday to end at $2.283 a pound. For the week, New York-traded copper prices inched up 1.4 cents, or 0.44%.
Copper traders will be looking out for private sector data on China's manufacturing sector due on Tuesday, amid ongoing concerns over the health of the world's second biggest economy.
The official China's manufacturing purchasing managers' index published Sunday dipped to 50.1 last month from 50.2 in March, compared to expectations for a reading of 50.4.
The Asian nation is the world’s largest copper consumer, accounting for nearly 45% of world consumption.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, May 2
European Central Bank President Mario Draghi is due to deliver a speech titled "The future of financial markets: A changing view of Asia" at the Asian Development Bank annual meeting, in Frankfurt.
Later in the day, the U.S. Institute of Supply Management is to publish a report on manufacturing activity, while San Francisco Fed President John Williams will speak at a public event.
Tuesday, May 3
China is to release data on the private sector Caixin manufacturing index.
The Reserve Bank of Australia will publish its interest rate decision.
In the U.S., both Cleveland Fed President Loretta Mester and Atlanta Fed President Dennis Lockhart are scheduled to speak.
Wednesday, May 4
The U.S. is to release the monthly ADP nonfarm payrolls report as well as data on the ISM non-manufacturing index, while the U.S. Energy Information Administration is to release its weekly report on oil stockpiles.
Thursday, May 5
China is to release data on the private sector Caixin services index.
The U.S. is to release weekly data on initial jobless claims, while Atlanta Fed's Lockhart, Dallas Fed President Rob Kaplan, St. Louis Fed President James Bullard and San Francisco Fed's Williams are all due to participate in a panel discussion titled "International Monetary Policy and Reform in Practice" at the Hoover Institute conference.
Friday, May 6
The U.S. is to round up the week with the closely watched nonfarm payrolls report.