Barry Norman’s Short Term Predictions For Gold, Silver, Sterling and Treasuries

Asian equities trade with losses of up to 1%. A dismal Wall Street end of session and upcoming US payrolls report keep investors away from riskier equities. Oil stabilizes following yesterday’s tumble, the dollar is marginally weaker, while the US T-Note future is slightly high, but off session highs.

The US calendar contains the June US payrolls report, probably the only driver of markets today. I see risks for a stronger report, both in terms of headline employment growth and in higher hourly wages, while the unemployment rate that fell unexpectedly last month may tick higher.

Core bond markets are expensive after the post-Brexit rally and remain so despite the minor correction in the past two days. They are still technically overbought. However, the report is published against the Brexit context which is a longer term bond positive.

So, payrolls should show quite a positive surprise to really hurt core bonds in a lasting way. Given my positive view on the payrolls, our analysts see asymmetric risks in favor of a bond correction. It shouldn’t go too far though.

Once markets get past payroll data attention will once again return to the UK and Brexit risks. The pound recovered a 31-year low to trade at 1.2955. Sterling also enjoyed some further relief after Wednesday’s Asian sell-off. The UK eco data were mixed. The Lloyds Business Barometer dropped to the lowest level in more than four years. Other pre-Brexit data were decent. Halifax house prices rose 1.3% on a monthly basis. UK production data declined less than expected in May after very strong April figures. The data were interesting, but we doubt that they had a substantial impact on sterling rebound. Wednesday’s steep sterling sell-off was probably a short-term exhaustion move, making room for a technical rebound.

Gold has crept down over the last two sessions as traders booked profits and prepared for a better than expected payroll report supported by strong ADP private payroll data and a drop in weekly unemployment claims. Gold and silver had been trading at the very top of their trading ranges just days ago. Gold is at 1358.65 while silver saw significant falls after soaring above the $20 level. Silver is trading at 19.777. A better than expected payroll report will see a drop in precious metals, but a slightly week may send gold as close to the $1400 level as Brexit fears and a US recession will dominate market sentiment.

The target of $1,425 is $75 higher than the previous forecast for the same period, and would be the highest price since August 2013.

Gold will probably extend its rally to as much as $1,425 an ounce by the end of this quarter on resilient investor demand and prospects for easier monetary policy, according to ABN Amro Group, the bank that’s rated by Bloomberg as the most accurate forecaster. FxEmpire analysts expect gold to remain below the $1400 level at least until the September 2^nd date for a new government in the UK. Later in the month pressure from the FOMC and the BoJ meeting should weigh on gold prices.