Here’s How Gold Will React To This Week’s 3 Key Events
We do not foresee any major catalysts until the Fed begins to taper its bond purchases. But in the interim, traders may take their cues from economic data that will give us clues as to whether the central bank is getting closer to taking action.
The first notable piece of data will come on Thursday, when the Bureau of Economic Analysis releases its first estimate of third-quarter U.S. gross domestic product. Currently, economists expect GDP to have grown at an annualized rate of 2 percent in the quarter, down from the second quarter’s 2.5 percent.
That would be discouraging for the Fed; based on its latest economic forecast, the central bank expects growth to accelerate into the end of the year and into 2014. The Fed predicts that growth will average 3 percent next year.
While a 2 percent reading for the third quarter won’t necessarily derail the Fed’s outlook, something notably below that level certainly will. And in turn, taper expectations will likely be pushed out further into the future in that scenario, which is bullish for gold. In contrast, a GDP reading above 2 percent would spur speculation that tapering could take place as soon as the December meeting.
Also scheduled for Thursday is the European Central Bank’s monetary policy meeting. Economists are split on whether the ECB will cut its main refinancing rate from the current 0.5 percent level. If so, that could push the dollar higher (euro lower) and gold lower.
Finally, on Friday, the Bureau of Labor Statistics will release its nonfarm payrolls report for October. Expectations are that employers added 120K jobs in the month, down from September’s 148K and well below what the Fed is hoping for.