During most of May the bullion market was in its early summer slumber, but by the end of the month both gold and silver took a dive and finished May in the red. The FOMC’s next move regarding its interest rate isn’t clear. The publication of the minutes of the last FOMC meeting didn’t offer additional input regarding its future steps. This month, however, the FOMC meeting will be accompanied with a press conference and an update to its economic outlook. Perhaps in this meeting the FOMC will reveal more about its future steps. Any new information regarding the Fed’s monetary policy could stir up the bullion market. Let’s review the latest developments in the precious metals market and see what is up ahead for gold and silver.
Gold and silver prices remained relatively flat during the first couple of weeks of May, only to tumble down at the end of the month. Their decline coincided with the rally in the stock market and the depreciation of the US dollar against the Canadian dollar, Aussie dollar and Japanese yen. By the end of May, the price of gold dropped by 3.87%; the price of silver, by 2.43%.
Let’s split May into two parts to demonstrate the shift in pace of bullion prices: the table below divides the month at May 15th; during the first part of May, gold inched down by 0.2%; silver rose by 1.6%. During the second part of May, however, gold plummeted by 3.7%; silver price, by 4%.
During the first part of May, the U.S dollar depreciated against the Yen, Canadian dollar, and Aussie dollar; in the second part, the US dollar slightly appreciated against the yen and Aussie dollar. The USD/Yen and AUD/USD currency pairs are usually strongly related with gold and silver. The chart below shows the changes of gold and silver during May, in which the prices are normalized to 100 on April 30th 2014.
The ratio of gold to silver (gold price/silver price) mostly fell during the month. The ratio decreased as silver price has under-performed gold price. During the month the ratio ranged between 67 and 66.
The main events of the month will revolve around the non-farm payroll report and FOMC meeting. In Europe, the ECB rate decision could also impact not only the Euro but also other related instruments such as bullion. Finally, the latest developments in Asia mainly in India might play a small positive part in pulling back gold and silver. Nonetheless, the potential developments in U.S will lead the way in influencing bullion investors. In conclusion, I think gold and silver will keep their slow fall during June.
Here is also a quick review I made on Youtube for this month’s outlook.
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