During the previous week, gold and silver didn’t do much, which brings recent weeks’ rally to a halt. I think the low trading volume and the anticipation of the next FOMC meeting could eventually lead to a reversal in the recent rally of bullion. Until then, the progress of the U.S economy may affect precious metals: If the U.S economy shows signs of progress, precious metals investors may consider translate these signs to higher odds for the FOMC tapering QE3 this year. During last week several U.S reports were published: GDP for the second quarter was revised up from 1.7% to 2.5%; jobless claims fell by 6k to reach 331k; consumer confidence remained virtually unchanged during August; new durable goods orders declined during the past month. Will gold and silver change direction and fall this week? Here is a short outlook for September 2nd to September 6th; this includes a fundamental analysis of the main publications that may affect bullion markets. These include: Rate decisions of BOC, ECB, BOE, RBA and BOJ, U.S manufacturing PMI, Australia’s GDP for second quarter, U.S and Canada’s trade balance reports, German factory orders, Bank of England rate decision, GB manufacturing PMI, ECB rate decision, and U.S. jobless claims.
The price of gold inched up by 0.06% last week; moreover, the average price reached $1,407.90 /t. oz which was 2.41% above last week’s average rate. Gold ended the week at $1,395.8 /t. oz.
During last week silver price declined by 1.10%; furthermore, the average weekly rate was $24.13/t oz, which was 4.02% above last week’s rate.
Herein is a short preview that presents the main publications and events that will unfold next week between September 2nd and 6th and may affect bullion prices.
For next week, let’s break down the upcoming publications and events according to the main economies:
Until the FOMC’s next meeting in the middle of September, the progress of the U.S economy could influence precious metals investors. If the U.S economy will keep showing growth, it may raise the odds of the FOMC tapering QE3 in 2013 and thus may drag down gold and silver. This week’s reports include non-farm payroll report, manufacturing and non-manufacturing PMI, trade balance and jobless claims. If these reports exceed expectations and show progress, they may raise the odds of tapering QE3, which may adversely affect gold and silver. Finally, if the US stock market will bounce back, this trend is likely to ward off investors from bullion.
This week, the ECB will decide on any changes to its monetary policy. The current expectations are for no change in policy. If Draghi will remain optimistic about the progress of the EU economy and won’t hint of any future reductions in the ECB cash rate, this could pull up the Euro, which tends to be linked with gold and silver.
China and India
In India, the Indian Rupee continued to lose to the USD; this trend along with the higher import taxes on gold are likely to further drag down the demand for gold. China’s upcoming manufacturing PMI could signal the progress of China’s economy. If China will show growth, it could positively affect commodities prices.
Australia, Japan and Canada
These countries’ relations with precious metals prices are mostly via their respective currencies. In recent weeks, however, the relations among these currencies and precious metals have diminished. In any case, the upcoming monetary policy meetings of RBA, BOJ and BOC could affect the Aussie dollar, Japanese yen and Canadian dollar, respectively. Any unexpected changes to policy could affect these currencies, and, in turn, may also affect precious metals prices.
Finally, gold holdings of SPDR gold trust ETF slightly rose again for the third consecutive week: During last week, the ETF’s gold holdings increased by 0.10%. But during the month, the ETF was still down 0.68% and by 31.82% since the beginning of the year (up-to-date). Current gold holdings are at 921.03 tons. If the ETF’s gold holdings keep rising, this will signal that the demand for gold as an investment is recovering again.
I think gold and silver might change direction and start to slowly lose ground especially if the U.S reports including manufacturing PMI and non-farm payroll reports exceed expectations. The summer is over and if the recent rally was partly inflated by low volume of trade and speculations, we could see a correction to last month’s trend in the coming weeks. Nonetheless, the sharp movement is likely to start once soon after the FOMC meeting will end.
For further reading:
- Weekly Outlook of Financial Markets for September 2-6
- Do Gold and Silver protect you from Inflation?
- Is the Golden Era of Gold Over?
- Will Gold Recover from its Recent Fall?
- Gold and Silver Yearly Outlook For 2013