The precious metals market entered the new week in a state of uncertainty, after a period of strong fluctuations due to changing growth expectations, persistent inflationary pressure and concerns about recession returning.
Precious metal prices recorded sideways but still positive developments last week, as gold remained at a high level in the context of investors considering between weakening psychological data and relatively solid real economic indicators. Meanwhile, silver fluctuated according to risk appetite and industrial prospects, at times performing worse than gold as concerns about growth remained.
However, information on Friday morning about the complete reopening of the Strait of Hormuz – provided that ceasefires between Israel – Lebanon and Iran – the US continue to be maintained – has breathed new life into market sentiment. Gold and silver prices rose sharply, matching the upward momentum of the stock market.
When the Middle East conflict temporarily subsides, the market may shift its focus to economic data to shape the policy expectations of the US Federal Reserve (Fed), thereby affecting the trend of precious metals, although the data release schedule for next week is relatively sparse.
The trading week will begin with March US retail sales data released on Tuesday morning, reflecting consumer health. Recent data shows a mixed picture but overall still positive, but many experts predict that signs of weakening may appear after a period of unexpected strong increase. For precious metals, data exceeding expectations may put pressure on gold prices due to consolidating views on maintaining high interest rates for a long time, while weak data will support gold and silver prices.
Next, the market will monitor housing data waiting for sale in March, thereby assessing the health of the sector sensitive to interest rates. Many experts say that the real estate market is still under pressure, as builders are facing difficulties in valuation due to fluctuating material costs, while the high interest rate environment continues to put pressure. Weak data will highlight the negative impact from tightened financial conditions, thereby supporting gold when increasing expectations of policy easing.
The hearing to approve Mr. Kevin Warsh for the position of Fed Chairman is also expected to take place on Tuesday, amid debates related to personal assets of about 130 million USD and the possibility of conflict of interest. Democrats are still pushing to postpone the hearing due to the US Department of Justice's investigation into incumbent Fed officials. Mr. Warsh is expected to offer a softer stance on monetary policy, a factor that could support gold prices by reducing the cost of opportunity to hold non-performing assets.
The weekly report on unemployment claims released on Thursday morning will be the only indicator of the labor market next week. Despite rising macroeconomic incertitudes, the labor market is still assessed to be in a state of "low recruitment - low dismissal", with claims maintained at historically low levels. However, if data increases sharply, this scenario could change rapidly, thereby supporting gold prices as the need to hedge against the recession increases.
Also on Thursday morning, the preliminary S&P Global General Purchasing Managers' Index for April will be closely monitored to provide a timely look at economic activity. Economists are increasingly cautious about growth prospects, as a survey by the National Business Economics Association (NABE) shows that the outlook "has changed rapidly and significantly". The survey also pointed out risks leaning towards the negative, reflecting concerns that growth momentum in both manufacturing and service sectors is weakening. For gold, any lower-than-expected data could strengthen safe-haven demand, especially if it signals widespread slowdown.
The trading week will close with the final results of the consumer confidence survey released by the University of Michigan – one of the important measures of household psychology. This index has declined sharply since the Iranian conflict broke out, while inflation expectations exceeded previous forecasts. White House economic advisor Jared Bernstein acknowledged this disparity, saying policymakers are facing "a difficult road" to convince people that the situation is improving. Weakening confidence, even if real economic data remains positive, is often beneficial for gold as it reflects potential risks in economic prospects.
