Gold and Silver Forecast for April 28 – May 2

Gold and silver moved sideways during the previous week only to slightly rise on a weekly scale. The economic reports that were released last week showed a modest slowdown in the U.S and may have contributed to the modest rise of gold and silver prices: New home sales fell by 14.5% in March; existing home sales remained soft during March – the annual sales rate slipped by 0.2%; jobless clams increased by 24k to reach 329k during the previous week. This week will be packed with news items that could jumpstart the precious metals market again. For the week of April 28th to May 2nd, several reports, events and decisions will come to fruition including: the third FOMC meeting, U.S GDP for Q1 2014, Yellen’s speech, U.S non-farm payroll update, U.S and China’s manufacturing PMI, Germany’s retail sales, EU flash CPI, U.S pending home sales, EU monetary development, and U.S factory orders. 

The price of gold inched up by 0.54% last week; conversely, the average price reached $1,288.76/t. oz which was 1.13% lower than last week’s average. Gold ended the week at $1,300.5 /t. oz.

The price of silver also rose by 0.48%; the average weekly rate was $19.5/t oz, which was 0.82% below last week’s price.

Herein is a short overview showing the main decisions, reports and publications that will unfold during April 28th to May 2nd and may affect precious metals prices.

Let’s breakdown the main events, speeches and reports by leading economies:

U.S

This week is packed with many headlines that will come from the U.S starting with the third FOMC meeting. This time, however, the FOMC meeting won’t accompany with a press conference. Nonetheless, FOMC chair Yellen is expected to give a speech later this week;  the FOMC is likely to keep cutting down its asset purchase program by another $10 billion to $45 billion. This decision could have a modest negative impact on gold and silver since the market is already expecting the FOMC will taper QE3. Conversely, if the FOMC surprises and doesn’t tapers QE3, this could have a short term positive impact on gold and silver. In the past four FOMC meetings precious metals dropped the next day as indicated in the table below.

FOMC statment and Gold Silver April 20

On that day, the U.S GDP preliminary estimate for Q1 will come out. This report could have a strong impact on the financial market than the FOMC decision if the report surprises and shows a lower than anticipated growth rate.  In the previous quarter the GDP grew by only 2.6%; currently, analysts estimate the economy grew by a smaller pace of less than 2%; if the GDP grows by a lower pace, this could have a positive effect on gold and silver.

Finally, the U.S non-farm payroll report will come out this week.

U.S.Labor Reports gold price and silver prices April 4 2014

The table above shows the reactions of the prices of gold and silver to recent U.S NF payroll reports. The last NF payroll update, which was close to the market’s projections, gold and silver rallied. If this time, the report doesn’t exceed the current expectations, bullion prices could resume their rally.

During last week, the U.S dollar slightly declined against most currencies including the Euro and Japanese Yen; this may have also slightly pushed up gold and silver prices. If the U.S dollar further weakens against leading currencies; this could keep pulling up gold and silver.

Europe

This week several reports will be released: EU flash CPI, German retail sales, EU monetary development, Great Britain manufacturing PMI, German consumer climate, and GB GDP for Q1 estimate. These reports could affect the Euro and British pound, which could partly affect the gold and silver.

India and China

During last week, the Indian Rupee dropped against the US dollar. If the rupee continues to depreciate, it could decrease the demand for gold and silver in India.

In China, the manufacturing PMI of 2014 will come out this week; it could shed some light on China’s growth. The flash estimate of HSBC wasn’t too positive and showed the manufacturing PMI is below 50. If the PMI falls, it could suggest China’s economy isn’t growing. This report could indicate of potential changes in the demand for gold and silver in China.

 

Finally, during last week, gold holdings of SPDR gold trust ETF slipped again by nearly 0.38%. The ETF is down by 1.13% since the beginning 2014. Gold holdings were at 792.139 tons by the end of last week. If the ETF’s gold holdings drops again, this may signal the demand for gold as an investment is weakening.

Takeaway

This week all eyes will be focused on the main events and reports that the U.S will have. The GDP and non-farm payroll report will be the main events of the week along with the FOMC’s meeting and Yellen’s speech. If the U.S economy doesn’t show signs of progress, it could bring back investors to gold and silver. Conversely, the FOMC is likely to further reduce its QE3 program, which tends to negatively impact precious metals. Since the expectations for this decision are high, this decision might have a smaller impact on gold and silver this time. In the meantime, the ongoing fall in demand for gold ETFs suggests fewer investors enter the gold market. Nonetheless, my guess the upcoming U.S economic report won’t reach the current expectations that will pull back up gold and silver. Therefore, I think gold and silver will rally this week. In any case, the volatility of gold and silver is likely to rise.

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