The precious metals market cooled down last week. Last week, the FOMC Chair Janet Yellen talked about the Federal Reserve’s policy and reassured that the Fed will maintain the low rate even if the U.S economy reaches the FOMC’s targets about inflation and labor. This speech wasn’t enough to pull back up the prices of gold and silver. Moreover, the appreciation of the U.S dollar against the Euro, Japanese Yen, and Canadian dollar contributed to the weakening of gold and silver last week. In other news, China’s GDP slowed down to an annual growth of 7.4% in the first quarter. This may have also contributed to the fall of precious metals prices. Further, several U.S reports were released and were mostly positive (and may have also dragged down gold and silver): The housing starts rose by 2.8% during March to reach 946 thousand; Philly fed index rallied to 16.6 in April; retail sales rose by 1.1% during March; the CPI slightly increased by 0.2% to an annual rate of 1.5%; jobless clams inched up by 2k to reach 304k. Will gold and silver bounce back? For the week of April 21st to April 25th, several reports and decisions will come to fruition such as: Draghi’s speech, U.S home sales, Canada’s retail sales, U.S core durable goods, Flash China and Euro Zone Manufacturing PMI, and UoM Consumer Sentiment.
The price of gold dropped by 1.9% last week; the average price reached $1,303.48/t. oz which was 0.51% lower than last week’s average rate. Gold ended the week at $1,293.5 /t. oz.
The price of silver fell by 1.75%; the average weekly rate was $19.67/t oz, which was 1.45% below last week’s rate.
Herein is a short overview showing the main decisions, reports and publications that will unfold during April 21st to April 25th and may affect precious metals prices.
Let’s breakdown the main events, speeches and reports by leading economies:
Last week’s Chair of FOMC Janet Yellen reassured a rate hike won’t happen so fast and will only occur after the U.S economy recovers. This still keeps the uncertainty high around the timing as to when the Fed pull the trigger on the rate hike.
This week, only a hand full of reports will be released including: durable goods, new and existing home sales, consumer sentiment, and jobless claims. If these reports show signs of growth in the U.S economy, they could drag further down gold and silver prices.
During last week, the U.S dollar rallied against most currencies including the Euro, Canadian dollar, Japanese Yen, and Aussie dollar; this may have also pushed down gold and silver prices. If the U.S dollar further strengthens against leading currencies; this could keep dragging down gold and silver.
This week several reports will be released: Great Britain new borrowing, German business climate, EU manufacturing PMI, and GB retail sales. These reports could affect the Euro and British pound, which could partly affect the gold and silver. Besides these reports Draghi will give a speech at the “De Nederlandsche Bank 200 years: Central Banking in the Next Two Decades” conference, in Amsterdam. His words carry weight and could stir up the market if he addresses the ECB’s policy or hints of ECB’s future plans. Bank of England will announce next month’s rate. If the BOE changes its policy, it could affect the British pound.
India and China
During last week, the Indian Rupee remained relatively flat against the US dollar. But it’s up for the past month. If the rupee continues to rally, it could increase the demand for gold and silver in India.
In China, the GDP for the first quarter of 2014 was released last week; it was lower than previous quarters. This may have also dragged down gold and silver. This week, manufacturing PMI will be released and could shed some light on China’s growth. This in turn, 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 dropped again by nearly 1.15%. The ETF is down by 0.76% since the beginning of the year. Gold holdings were at 795.135 tons by the end of last week. If the ETF’s gold holdings falls again, this may signal the demand for gold as an investment is weakening.
The ongoing decline in demand for gold as an investment, as indicated in the fall in GLD’s gold hoards, could continue and thus drag down precious metals prices. Moreover, the negative news regarding the progress of China, the world leading importer of gold, didn’t help gold and silver prices. On the other hand, the U.S economy is slowly showing signs of recovery. If the upcoming reports continue to show growth, they could drag further down gold and silver. Further, the recent appreciation of the U.S dollar and the recovery of the U.S equities could steer investors away from bullion. Therefore, I think gold and silver will slowly decline again during next week.
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