PRECIOUS-Gold hits 10-month low on dollar ahead of ECB statement

Weekly outlook

This week on the Markets

In approach to the new trade week, here are the main economic events that will move the markets around the globe.

1. Ben Bernanke speaks: Monday, 23:15. Chairman Ben Bernanke is scheduled to speak at the Federal Reserve Bank of Atlanta 2013 Financial Markets Conference in Stone Mountain, where he may talk about the advantages of the low-interest-rate policies in helping growth in the US and around the world, as well as lowering US unemployment rate to 6.5%.

2. US FOMC Meeting Minutes: Wednesday, 18:00. No changes were announced in the recent Fed meeting, making the minutes more interesting. The previous releases showed the variety of thoughts in the FOMC, and the media focused on the hawkish voices. The reaction was a stronger dollar, even though the doves led by Bernanke control the Fed. Will we see the same knee jerk reaction once again?There is a good chance, as the meeting occurred before the recent jobs report.

3. US Federal Budget Balance: Wednesday, 7:00. Despite the relatively high deficit, things are looking up for the US budget balance. Tax revenue is up and spending growth is slowing as the government’s deficit is coming down. February is typically a high deficit month, with low receipts, the balance showed a $203.5 billion deficit, however this was better than the 208 billion average of the last six years.

4. Australian employment data: Thursday, 1:30. Australia’s unemployment rate remained unchanged at 5.4% in February, while the job market added 71,500 positions, reaching 11,628,300 in February. Full-time employment rose 17,800 to 8,117,400 in February while part-time employment was up 53,700 to 3,510,800. A contraction of 78,200 jobs is expected, while unemployment rate is predicted to remain unchanged.

5. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial jobless claims surged last week by 28,000 to 385,000, rising for the third straight week. This rise increased the four-week average to 354,250.A Labor Department spokesman said the reading might have been the figures may have been affected by the Easter holiday. However, the recent increases could also imply that companies are starting to cut jobs, probably due to the steep government spending cuts that began on March 1. A drop to 362,000 is predicted this time.

6. US Retail sales: Friday, 12:30 U.S. retail sales advanced solidly in February, rising 1.1%, following 0.4% rise in January amid an increase in automobile sales, indicating a strong retail sales reading in the first quarter. Economists expected a lower reading of 0.5%. Meanwhile Core sales excluding Automobiles, retail sales increased 1.0%, from a 0.4% advance in January. Retail sales are expected to remain unchanged, while Core sales are forecasted to gain 0.2%.

7. US PPI: Friday, 12:30. Producer prices in February climbed by 0.7%, the strongest reading in five months amid a sharp rise in gasoline prices. The reading was in line with market predictions, following a 0.2% advance in January. However, underlying inflation pressures remained contained, with wholesale prices excluding volatile food and energy costs rising 0.2% after a similar advance in January. Producer prices are expected to fall 0.1%.

8. UoM Consumer Sentiment (first release): Friday, 13:55. Consumer sentiment plunged in March to 71.8 from 77.6 in January, the lowest reading in over a year. Many responders were not happy with the government’s inability to deal with its finances. The one-year inflation expectation held steady at 3.3% and the five-to-10-year inflation outlook dropped to 2.9% from 3%. A rise to 78.8 is forecasted.

9. Ben Bernanke speaks: Friday, 16:30. Federal Reserve Chairman Ben Bernanke will speak in Washington DC. His words cause volatility in the markets.

This is all for this week. Stay with us for more updates to follow during the trading week)

Chart of the week

PRECIOUS-Gold hits 10-month low on dollar ahead of ECB statement 

FUNDAMENTALS**

Gold hit a 10-month trough below $1,540 an ounce on Thursday as the dollar strengthened ahead of a statement by European Central Bank chief Mario Draghi, after the bank left rates on hold as expected at its latest policy meeting.

The statement will be closely watched for clues on monetary policy. Gold, which benefits from loose monetary policy, earlier failed to capitalise on surprisingly strong easing steps by the Bank of Japan.

Spot gold XAU= fell as low as $1,539.74 an ounce, its lowest since May 30, and stood at $1,546.90 by 1200 GMT, down 0.7 percent. On the charts, the next downside target stands at the May low of $1,527, traders said.

U.S. gold for June delivery GCcv1 fell 0.4 percent to $1,546.70.

"Gold is suffering from dollar strength ahead of the ECB, which is unlikely to deliver any surprise again today," VTB Capital analyst Andrey Kryuchenkov said.

"At this point it's all about sentiment and if bailout talks in Cyprus, tensions in North Korea and BoJ monetary easing have not triggered buying it is difficult that we will see a turnaround in prices any time soon."

The dollar strengthened against the euro after euro zone services PMI data showed continued contraction in the sector in March, heaping more focus on the ECB.