5 Things You Need To Know About Gold: May 21, 2014 - Gainesville Coins News
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5 Things You Need To Know About Gold: May 21, 2014

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5 Things You Need To Know About Gold: May 21, 2014

As we enter the summer months, markets are going to be more headline-driven. With that in mind, here are some of the headlines to watch this morning:

1.) MBA Mortgage Applications (7:00am ET):

The Mortgage Bankers' Association weekly mortgage applications report tracks the number of people who have applied for a mortgage to buy a home, or to refinance an existing mortgage.  The "new purchases" portion of the report is a leading indicator for the housing market, as people who have applied for a mortgage are making bids on homes.

What to expect?

This report is for the week ending May 16th. The previous week saw a rise of 3.6%, but that was mostly refinancing applications. Loan requests for home purchases dropped 0.1%.

Effect on gold: Single-family home purchases have a ripple effect on the economy, but only a peripheral effect on gold. Still, as an indicator of the strength of the economy, it should still be watched by gold investors.

2.) Markit Flash Manufacturing PMI for China (9:45pm ET):

This is a private survey of Chinese purchasing managers, conducted by Markit. The official PMI numbers out of Beijing were suspect for a long time (though they have gotten better,) so the Markit numbers hold a prominent place in the minds of investors exposed to China. The official numbers can also vary from the Markit numbers, because Markit does not poll large state-run enterprises.

What to expect:

Last month, the flash PMI for China came in at 48.3, the fourth month of contraction, but better than the 48.0 for March. China is experiencing some economic pangs, as the government tries to re-tool the economy away from an export-driven model to a consumer-driven model.

Effect on gold: Since China is now the world's leading consumer of gold, the health of the Chinese economy is very important to physical gold demand.

3.) US Petroleum Reserves (10:30am ET):

This is the weekly status report by the Energy Information Administration on US petroleum stockpiles. This report has an effect not only on oil futures, but the price you pay at the pump.

What to expect?

US petroleum reserves increased by 900,000 barrels in the previous report, putting total inventory at the upper range of historical levels.

Effect on Gold: Gold has usually followed the lead of crude oil prices, since they are both denominated in dollars. However, that link has weakened somewhat in the era of quantitative easing and zero interest rate policies by major central banks.

4.) Yellen Speaks (11:30am ET):

Federal Reserve Chairwoman Janet Yellen will speak at NYU's commencement in Yankee Stadium today.  Since Yellen is proving prone to verbal gaffes, Wall St. will be hanging on her every word.

What to expect:

If Yellen stays on script, the equity markets should feel reassured that she will keep dealing the monetary policies that mean P/E ratios on stocks don't mean anything - buy, buy, buy!

Effect on gold: Again, if she doesn't insert her foot in her mouth, the gold market has heard everything before.


5.) April FOMC Minutes Released (2:00pm ET):

THIS is what everyone is waiting for today -- our inside look at what happened behind closed doors at the last Federal Reserve Open Market Committee meeting. Was there dissent over policy? Was a timetable for raising the benchmark interest rates above zero mentioned? Will someone spill the beans on who in Belgium is buying more Treasuries every month than the Fed is tapering?

What to expect:

Watch for anything but perfect harmony to be seized upon by the markets.

Effect on gold: Since real interest rates are negative right now, eliminating the opportunity cost of holding gold over Treasuries, anything that intimates rising interest rates will be a negative for gold (at least temporarily.)

by Steven Cochran

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