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WEEK AHEAD: APRIL 26

Short Description

It’s the Federal Reserve Meeting and US GDP data this week. I analyse the price trends and fundamental outlook for spot gold and silver prices. Thanks! Rich

Video Script

Hi everyone, this promises to be a big week for trading forex and other financial markets because we’ve got the Fed meeting as well as US GDP data. And in the run up, we’ve had some big moves up in the price of gold and silver, which I will discuss as well as run through the economic calendar.

 

As I say it’s a big week for economic data. First up is the Bank of Japan on Tuesday where policy is expected to remain ultra-loose. Japan has been suffering a severe third wave of the pandemic and its even thrown this year’s delayed Olympics being held in the country in jeopardy once gain. So if anything that might give the BOJ a dovish tilt to their language, which in theory is yen-negative. 
The Fed is expected to keep policy steady but that makes it no less important. We saw a blowout GDP from China last week, now it’s the turn of the world’s largest economy – which is expected to see annual growth in excess of 6%. Also of note, Germany’ the world’s fourth biggest economy reports growth figures on Friday, which could be important for the euro.

 

Outside of the economic calendar, it’s the turn of US tech stocks to report first quarter earnings. Apple, Microsoft, Amazon, Alphabet, Facebook, Tesla and Alibaba to name just a few, all report results.

 

The trend on the daily price chart of gold remains down so the rally over the past 2 weeks presents a potential selling opportunity for bears. For the bulls, $1800 per oz as well as the 50% and 61.8% retracement levels of the decline since January 6 are important hurdles to overcome.

 

I talk about this all the time – the gold price depends a lot on interest rates because it’s a non-yielding asset. As a haven investment, gold is always competing for investors’ money with bonds. That’s what makes this week’s Fed meeting important for gold. So, what will the Fed do? According to Forbes, Powell has laid out three standards that must be met before the FOMC will consider changing its stance on rates: The recovery in the labour market is effectively complete, Inflation has reached 2%, Inflation is on track to run above 2% for a sustainable time. “When we get those three boxes checked that’s when we’ll raise interest rates,” he said. “Until then we won’t.”

 

Silver has been in a big price range on the daily chart since last summer between $22 and $30. More recently, price holding above the 200-day moving average and breaking above a falling trendline are some signs bulls might be taking control.

 

The backdrop story to silver is the massive shortage of supply in physical silver, which really kicked off when the WallStreetBets Reddit community sparked a buying frenzy earlier this year. That’s supported by real-world supply-chain problems for silver, which is used in things like solar panels, caused by the pandemic. This week the big datapoint outside of central banks is US Gross Domestic Product. In normal circumstances a better-than-expected GDP number would be good for the dollar and bad for silver, which is priced in dollars. However, its possible that if the Fed doesn’t bring forward its guidance for the first rate-hike, it could be silver that gets the boost because a strong economy shows industrial demand for silver should be higher. 

 

Right thanks everyone, good luck trading this week and make sure to subscribe so you don’t miss the next episode of the week ahead.