Calmer Waters, Jobs and the Fed

Under intense selling pressure, the precious metals complex traded dramatically lower on the day. As of 4 o’clock Eastern standard time, gold (spot price) is currently trading at 1257 (-.0.88%), putting it down almost $11 on the day. The most active futures contract (June 2017) is trading at 1258, down just over $10 (-0.82%) on the day. Silver is trading down approximately $0.35, with a net loss of 2%. This metal is leading the way in regards to percentage drawdowns in the precious metals complex today.

Geological hotspots remained calmer this weekend, with no new action in North Korea since the launch of a test ballistic missile early Saturday. According to CNN, “A ballistic missile launched early Saturday by North Korea in defiance of international pressure and at a time of heightened regional tensions appears to have failed.

The missile blew up over land in North Korean territory, said U.S. Navy Commander Dave Benham, a spokesman for the U.S. Pacific Command.”

Second Quarter GDP Model Looks for Economic Growth

It seems likely that today’s sharp decline in gold pricing can be partially attributed to the forecast of a stronger second-quarter GDP. After experiencing one of the weakest quarters in the last three years, the Atlanta Fed tracker release numbers suggest an extremely robust second-quarter.

Per MarketWatch, ““When headlines began to cross about a 4.3% Q2 reading in the Atlanta Fed’s ‘GDPNow’ model forecast, there was a sharp drop in both Treasurys and gold futures,” Tyler Richey, co-editor of the Sevens Report, told MarketWatch.

The Atlanta Fed tracker of GDP points to a strong rebound for the second quarter after the slowest quarter in three years. The GDPNow model forecasts 4.3% growth. That would be the strongest growth since the third quarter of 2014.

“If the economy were to grow at that pace in Q2, that would have hawkish policy implications that are bearish for both Treasury’s and gold,” said Richey.”

Jobs and the Fed

There are two key events which will occur this week and most certainly could affect gold and silver prices. On Tuesday, the Federal Reserve will conduct their regular FOMC (Federal Open Market Committee) meeting, which will conclude on Wednesday. Then, on Friday, the U.S. Labor Department will release last month’s jobs report.

Although many economists predict that the Fed will keep interest rates steady, it is the liquidation of Fed assets that has an extreme number of unknowns, and therefore uncertainties, associated.

As reported by Fox Business,” Officials want their benchmark federal-funds rate to remain the primary tool for managing monetary policy, meaning they would like the balance-sheet wind-down to run quietly in the background once they start the process. The official account of the March meeting indicated officials were leaning toward gradually tapering the reinvestments of principal payments on Treasury and mortgage securities as opposed to stopping them cold turkey, but said no decision had been reached.”

On a technical basis, gold traded through a critical support level today, when the price broke below 1261. Our technical studies indicate the next levels of support in gold fall at 1245 and then at 1228. Resistance would once again be between 1265 and 1261.

Wishing you as always, good trading,