Hawaii Six O - Gary Wagner
Upcoming Events This Week Create Bullish Currents for Gold and Silver
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There is a trifecta of events this week that will have an impact on gold pricing. These events will occur throughout the entire week beginning Tuesday in China and concluding on Friday.
The first event is a resumption of trade negotiations between the United States and China which will begin Tuesday in Shanghai. The negotiations will be spread over two days with Steve Mnuchin, U.S. Treasury Secretary and the United States trade representative Robert Lighthizer leading the U.S. negotiations. This will be the first official meeting since the G-20 truce was reached last month by President Trump and President Xi Jinping.
According to CNBC, “Expectations for a long-term resolution remain low: Beijing is awaiting Washington’s stance on Huawei and Trump believes China may hold out until the 2020 election.”
The second event and undoubtedly the most important event this week is this month’s FOMC meeting which will begin on Tuesday and conclude on Wednesday. It is widely believed that the Fed will announce a rate cut on Wednesday. Although there is an overwhelming probability (73.9%) that the Federal Reserve will cut rates by ¼ %, there is a 26.1% probability that they will announce a cut of ½ a percent this according to the CME’s FedWatch tool.
With a high probability that the cut announce will be ¼ %, market participants will focus in on how many rate cuts will be initiated this year. Currently economists are forecasting anywhere from 1 to 3 cuts this year. Inasmuch as ¼% rate cut has been factored into current pricing in the financial markets, statements regarding the number of rate cuts will certainly have an influence on pricing moving forward.
Citing a weakening of the global economy, former Federal Reserve Chair Janet Yellen said she supports a ¼% rate cut. If initiated by the Fed this will be the first instance in more than a decade were the Federal Reserve has cut its benchmark interest rate.
President Trump also weighed in on the upcoming FOMC meeting as he lashed out today calling current rates overly restrictive underlining that a “small” rate cut (1/4 %) would not be enough this week. In a tweet sent out by Trump he said that with very low inflation our Fed does nothing - and probably do very little by comparison to the actions of the European Union and China.
Lastly, on Friday U.S. Labor Department will release July’s Jobs Report. Currently the estimate is indicating that the U.S. economy is still strong and that 170,000 nonfarm payrolls were added this month. Analysts are also predicting an extremely low unemployment rate of 3.7%.
As of 4:00 PM EDT gold futures basis the most active August contract is up $6.90, which is a net gain of almost ½ %, and is fixed at $1426.20. Silver basis the most active September contract is also up approximately ½ a percent and currently fixed at $16.485.
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Wishing you as always, good trading,