Gold Fundamental Analysis – week of September 5, 2016

Gold closed the week at 1328.25 and is a strong buy into next week with the likelihood of a rate increase in September less likely after a group of lackluster reports including the jobs data on Friday. Although the quarterly totals for jobs and production remain better than expected the turn in August data might give the Fed reason to back off rate increases. Gold will be volatile to Fed speakers this week and the ECB rate decision on Thursday.

The big news today governing fundamentals was the fair-to-middling jobs report issued by the U.S. Department of Labor. While 151,000 new jobs number is not awful, it’s a low enough number that it’s safe to say that the September meeting of the FOMC will not bring forth an interest rate hike. However, it is very curious that the CME FedWatch probability index that covers potential rate changes went only from 24% to 21% and did not fall into the single digits.

Analysts are thinking that the stable, low interest rates, which will last until December, will engender somewhat of an equities bull market once the Labor Day holiday is over up until the December Fed meeting. This is in spite of the fact that the VIX is lower today, an indication that stock will be quiet. Let’s see what happens after everyone is back full time on Wall Street.

The precious metal was given further support as analysts believe that the employment report may contribute to a delay in the Fed rate hike. Current expectations are that the Fed may raise rates from 0.50 to 0.75 during the December FOMC meeting. According to the CMEGroup’s’ s Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 21 percent at the September 2016 meeting, 26 percent at the November 2016 meeting, and 54 percent at the December meeting.

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This Week’s Economic Events That You Should Be Monitoring:

 Government Bond Auctions

Date Time       Country           Auction

Sep 06 11:00 Austria Holds bond auction

Sep 06 11:30 UK 1.5% 2026 Gilt

Sep 06 11:30 Germany Holds I/L bond auction

Sep 07 10:30 Denmark Holds bond auction

Sep 07 11:03 Sweden Holds bond auction

Sep 07 11:30 Germany Eur 5bn 0% Aug 2026 Bund

Sep 08 11:00 Ireland Holds bond auction

Sep 08 17:20 Italy Announces details of bond auction