Gold Outlook
The safe-haven asset has started the week on a somewhat softer footing, with net sales kicking in at the European open. However, the gold price remains firmly higher on the month following the breakout above the 1826.71 level. The critical focus for gold continues to be the US inflation story.
With prices on the rise in the US and the Fed still pushing back against any near-term rate hikes, gold derives demand from its traditional “inflationary hedge” mechanism. Given that the Fed looks unlikely to raise rates until well into next year, the short-term outlook remains favorable for gold.
Any downside across the risk complex, resulting from a more robust US dollar, should also see gold benefiting from haven demand. The most significant material risks for gold are from any surge in US data which might raise the prospect of the Fed bringing forward its rates guidance.
However, with the Fed focused chiefly on restoring employment, this dynamic would likely only come about due to a bumper set of labor market readings.
This week, the focus will be on US retail sales. Given their importance as part of the GDP calculation, there is room for US dollar/gold volatility in response to the release if we see any significant deviation from forecasts.
Silver Outlook
Silver prices are essentially tracking the moves in gold for now. The market has started the week on a softer footing following a solid rally last week. With the US Dollar a little weaker today also, there is room for silver (and the metals complex as a whole) to recover today.
The key focus will be on US data this week, with any US dollar upside likely to curtail the rally in silver. Any disappointments, however, should see the US dollar unwinding near-term, creating room for a continuation higher in the metals.