Gold prices staged a dramatic relief rally last week, as the combination of a dovish Federal Reserve and slumping dollar created a favorable tailwind for precious metals. The week ahead could promise further upside for the yellow metal, which appears to have recovered from the March swing low below $1,200.
April gold futures advanced $3.10, or 0.3%, to $1,230.20 U.S. a troy ounce on Friday, securing its first weekly gain in three. Bullion added 2.4% for the week to close at its highest level since the beginning of March.
The daily contract is gaining momentum, based on the Relative Strength Index (RSI). Prices moved above the 50-day simple moving average after beginning the week near the lower end of the Bollinger band, which is indicative of oversold levels.
May silver futures rose nearly 3% during the week to close at $17.41 a troy ounce, their highest settlement since March 7.
Precious metals rose as the dollar fell in the aftermath of the Federal Reserve’s decision to raise interest rates on Wednesday. The highly anticipated policy statement offered few clues about the pace and timing of future rate adjustments. It was also delivered in a tone that many investors read as bearish.
The Fed left its forecast for the economy and inflation unaltered from the December meeting, as officials continued to anticipate tepid growth over the next three years.
The U.S. dollar index fell more than 1% following the decision and eventually hit a fresh five-week low. It lost ground to the euro, British pound and Canadian dollar in the latter half of the week.
The week ahead could see continued divergence between the dollar and precious metals, as investors assess the Federal Open Market Committee’s economic forecast against the Republican administration’s pro-growth agenda. The Fed anticipates annual growth of around 2% over the next three years. Meanwhile, President Donald Trump has promised 4% expansion.
In terms of upcoming data releases, U.S. durable goods orders and housing sales will make headlines this week. Globally, reports on Japanese trade and U.K. inflation could also influence the currency markets.
Investors will also be monitoring a parade of Federal Reserve speakers throughout the week. Chicago Federal Reserve Bank President Charles Evans kicks off the speaking tour on Monday with a speech at the New York Association for Business. Evans is a member of this year’s FOMC policy board, and voted in favor of raising interest rates at the March meeting.
Regional Fed Bank Presidents Esther George (Kansas City), Loretta Mester (Cleveland) and Eric Rosengren (Boston) are scheduled to deliver speeches on Tuesday.
On Thursday, Fed Chair Janet Yellen will give a keynote address at the Federal Reserve System Community Development Research Conference in Washington. The following day, her colleague Charles Evans will deliver opening remarks at the same conference in Washington.
San Francisco Fed President John Williams and James Bullard of St. Louis will also make the rounds on Friday.
Comex Gold Futures (April 2017)