(Kitco News) - Gold prices are seen rising again next week as the metal's safe-haven role will likely support the market.
Silver prices are expected to remain range-bound to perhaps slightly weaker, especially if economic data continues to come in lower-than-expected.
On the week, August gold futures prices on the Comex division of the New York Mercantile Exchange settled at $1,541.70 an ounce up 0.29% on the week. July silver settled at $36.191 an ounce, down 4.42% on the week.
In the Kitco News Gold Survey , out of 34 participants, 19 responded this week. Of those 19 participants, 12 see prices up, while five see prices down and two see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.
Gold received a late-week boost Friday following another round of bearish economic data.
The May unemployment report from the U.S. Department of Labor was weaker than expected, even as market watchers braced themselves for smaller job growth after a poor report from payroll firm ADP earlier this week. The Labor Department said only 54,000 non-farm jobs were created in May and the unemployment rate ticked up to 9.1%. That caused equities to sell off sharply again this week and gave a boost to gold in a safe-haven bid.
Nomura analyst David Resler said supply-chain disruptions in the motor vehicle industry had an impact on May's data, as did a drop in the food processing industry. "We suspect (that) may be reflecting efforts to defray the costs of higher commodity prices by trimming the overall wage bill," he said.
Resler said the report "confirms that the economy has entered a bit of a soft patch, we suspect this will prove transitory."
This view is based on the household survey, he said, which showed employment of private sector wage and salary workers rose 319,000. "For most of the last six months, that measure and private NFP had been tracking each other closely. This big difference is partly due to different seasonal adjustments but the long-term similarity in their movements suggest payrolls will rebound toward the 200k range in the next month or two," he said.
There are some concerns that if equities fall it will drag down other markets, including gold, because of the correlation markets have had together.
Jim Steel, senior vice president and metals analyst with HSBC, said it's possible gold could fall in an initial stock market rout, but the downside for gold would be limited. "Gold still has the safe-haven attribute that will offset it. But, it's going to be tough to move higher," Steel said.
Some analysts said the jobs data could mean the Federal Reserve will stay in a quantitative easing mode longer than the market expects. The second round of quantitative easing ends this month, and there is debate on whether the jobs data will give the Fed a reason to continue to buy back bonds.
The uncertainty in the markets regarding a possible slowing economy and whether or not the Fed will resort to some kind of new stimulus program ultimately supports gold, said Shawn Hackett, president of Hackett Financial Advisors.
"This keeps gold as a legitimate, alternative currency," Hackett said.
He also noted that the uncertainty surrounding any new stimulus might be in the markets until the end of June, when the next Federal Open Market Committee meets. "Depending on what they say, this break (in equities) could either be a precautionary sell-off or just lead to acceleration of selling. Whatever they do, they're not going to tighten (rates)," he said.
Dave Toth, director of technical research at RJ O'Brien and rjomrt.com, said the technical charts are still "constructive" for gold. Mid-week, he said, gold rebounded to the exact 38.2% retracement in context of the past month's trading action. Given the move, gold could go to $1,551 and possibly test the all time highs from May.
Silver prices are still volatile after the break in May, and they could come under further pressure if signs of a slowing economy continue to mount. Silver is partially a safe-haven and partially an industrial metal - if industrial demand slackens off that could lend pressure. So far, though, there is strong demand on the retail physical side as the U.S. Mint has recorded strong sales for coins.
"Silver is a different story than gold. The economic weakness environment might take over for silver and overwhelm the monetary side. When push comes to shove, you buy gold," Hackett said.
Toth said silver has been sitting in a range without much direction, which makes it difficult to gauge where it might go. Longer-term silver could move higher, but in the short-term, the risk-reward scenario is limited until the metal can decide on direction. Next week China and Hong Kong will be closed on Monday for the Dragon Boat holiday, so activity out of that part of Asia will be quiet.
Data-wise it will be a quiet week for the markets, too. On Wednesday the Federal Reserve will release its Beige Book and on Thursday will be the weekly jobless claims. After May's dismal showing for job creation, market participants will watch this data very carefully.
By Debbie Carlson of Kitco News email@example.com