The gold and silver market slightly recovered during last week. The recent non-farm payroll report, in which 192 jobs were added during March, was an improvement from previous months but wasn’t better than expected. The rate of unemployment remained flat at 6.7%. Some expected the rate to fall to 6.6%. This news was enough to pull back up the prices of gold and silver. In the forex market, the U.S dollar slightly depreciated against the Euro and Aussie dollar. This trend may have also contributed to the modest recovery of bullion. In other news, several reports showed mixed signal regarding the progress in the U.S economy: During March, the manufacturing PMI slightly rose by 0.5 percentage points to 53.7, which means the manufacturing sectors are growing at a faster pace than last month; jobless clams slightly rose by 16k to reach 326k. Will gold and silver change direction again and fall? For the week of April 7th to April 11th, several reports and events will come to fruition including: U.S JOLTS Job Openings, minutes of FOMC meeting, China’s CPI, U.S PPI, U.S federal budget, China new loans, BOC Business Outlook Survey, and BOE and BOJ monetary policy meetings..
The price of gold slightly rose by 0.7% last week; conversely, the average price reached $1,288.38/t. oz which was 1.12% lower than last week’s average rate. Gold ended the week at $1,303 /t. oz.
Silver price rallied by 0.8%; the average weekly rate was $19.848/t oz, which was 0.01% below last week’s rate.
Herein is a short overview showing the main decisions, reports and publications that will unfold during April 7th to April 11th and may affect precious metals prices.
Let’s breakdown the main events and reports by leading economies:
Last week’s NF payroll report showed signs of progress and was inline with ADP estimates, but some people expected better results. This was enough to drag down the prices of precious metals. The table below shows the relation between the number of jobs added each month (not revised) and the changes in precious metals prices.
The minutes of the last FOMC meeting will be released this week. Last month, the FOMC decided to taper again its asset purchase program by $10 billion to $55 billion. This news seems to have had an adverse effect on the prices of gold and silver. The US dollar also recovered against major currencies. The minutes could shed some light on this decision, the FOMC’s future monetary plans including raising its cash rate;
Besides the minutes of the FOMC meeting, this week, several reports will be published including: JOLTS Job Openings report, Federal Budget Balance, PPI, and jobless claims. If these reports show signs of progresses in the U.S economy, they could pressure down precious metals prices.
During the previous week, the US dollar slightly depreciated against the Euro Canadian dollar, and Aussie dollar, which may have also pulled up gold and silver prices. On the other hand, the Japanese Yen rose again against the USD. If the U.S dollar continues to weaken against leading currencies; this could moderately pull up gold and silver. The correlation among USD/Yen, AUD/USD and precious metals have weakened in recent weeks;
The chart below presents the linear correlation among leading currencies pairs and precious metals prices during March-April.
This week several reports and events will take place: Great Britain Manufacturing Production, French Industrial Production, and BOE Rate Decision, These reports and events could affect the Euro and British pound, which could partly affect the direction of gold and silver.
India and China
During last week, the Indian Rupee remained nearly flat against the US dollar but rallied during most of March. If the rupee resumes its rally, it could increase the demand for gold and silver in India.
In China, the CPI, trade balance, and new loans report will be released and could shed some light on China’s progress. This in turn, could indicate of potential changes in the demand for gold and silver in China.
Finally, during the previous week, gold holdings of SPDR gold trust ETF dropped by nearly 1%. The ETF is still up by 1% since the beginning of the year. Gold holdings were at 809.18 tons by the end of last week. If the ETF’s gold holdings fall again, this may signal the demand for gold as an investment is weakening.
The recent NF payroll report pulled back up the prices of gold and silver at the end of the week, but during most of the week precious metals moved in an unclear trend. This unclear could continue this week, especially since the minutes of the FOMC meeting will be release and could raise the speculations around the next tapering decision and the timing of raising the cash rate. This report could stir up the bullion market again for a very short period. Besides this report, the other monthly updates referring of China, U.S and Europe aren’t likely to have a strong effect on the forex and commodities markets. If the U.S dollar continues to depreciate against leading currencies, this could pull further up precious metals. Conversely, if the U.S leading equities continue to fall as they did on Friday, this could steer investors back to gold and silver. Therefore, I remain neutral on gold and silver this week.
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