Last week gold and silver prices changed direction from a downward trend to a sudden steep increase on Thursday and Friday. Could this mean there is some fundamental shift in the bullion market that warrants such a shift? The main noteworthy news that might have affected precious metals was the tumble in the Philly Fed Index and the minutes of the recent FOMC meeting. I suspect these two items may have rekindled the old question “will there be another QE program in the near future?” This upcoming week there are items on the agenda that may affect the gold and silver prices. The main publications will revolve around the U.S core durable goods, China’s manufacturing PMI, U.S new and existing home sales Japan’s trade balance, and Germany’s business climate. Of course the ongoing political developments in Greece and the economic slowdown in Spain may also keep the news cycle busy.
Here is a short overview and a forecast for May 21st to 25th; this includes a short description with a fundamental analysis of the main news items, publications, and public speeches that may affect precious metals prices.
Gold price rose during last week by 0.5%; alternatively, during said time the average rate reached $1,564.3 /t. oz which is 2.44% below the previous week’s average rate of $1,603.46 /t. oz. Silver declined on a weekly scale by 0.61%.
During last week the main news items from Europe, beside the elections in Greece that will be held in June 17th, the ECB temporarily stopped lending to several Greek banks. Moody’s downgraded the Spanish Banks. On the other, the higher than expected growth rate of Germany’s GDP in the Q1 2012 was among the few positive news items coming from Europe. These news items along with the rise in U.S housing starts during April may have adversely affected the Euro and thus dragged along with it the bullion market.
But on Thursday the Philly Fed Index plummeted to -5.8. This news along with the minutes of the FOMC meeting may have rekindled the speculation around another round of QE. As a result (so I suspect) gold and silver changed direction and were trade up on Thursday and Friday.
The Euro depreciated again against the U.S dollar by 1.05% (on a weekly scale); furthermore, other “risk” currencies such as the Australian dollar and Canadian dollar also depreciated against the U.S dollar by 1.74% and 2.16%, respectively. This fall in the Euro/USD and AUD/USD may have been among the factors to pull down gold and silver mainly during the first half of the week.
The video link above presents a broad overview for the main publications, public speeches and events that may affect gold and silver prices between May 21st and May 25th; the video includes reviewing the main reports, events, decisions and publications that will come out during the days to come. Some of these reports and events include: U.S core durable goods, GDP of Great Britain for first quarter of 2012, U.S existing and new home sales reports, ECB President Draghi will speak, China’s flash manufacturing PMI, German business climate and U.S. jobless claims weekly update (just to name a few).
In conclusion, I still speculate the precious metals prices won’t show strength and will resume their downward trend on a weekly scale: the recent rally from the end of last week might continue at the beginning of the week on pure momentum as the speculation revolving the future steps of the Fed will continue. I don’t this there is enough to go on for concluding there will be QE3. On the other hand if the upcoming U.S reports including the core durable goods, new and existing home sales and jobless claims won’t meet expectations then the may further contribute to recovery of gold and silver prices. But if these reports will be positive then bullion might resume its descent. Finally, The EU related news including the developments in Greece, Spain and Italy and the upcoming speech by President Draghi might also play a role in the forex markets mainly affecting the Euro, which could consequently also affect gold and silver.
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