Gold and Silver Forecast for May 19-23

Gold and silver slightly rose last week but on a monthly scale they are still nearly flat lined.  Even the forex market also showed signs of unclear trend and the U.S rallied against the Euro but fell against the yen and Canadian dollar. In the U.S jobless clams dropped again by 24k to reach 297k; Philly fed index slipped to 15.4 in May; the consumer price index rose by 0.3% in April and the core CPI by 0.2%. These news items may have slightly moved precious metals prices. Will gold and silver break free from their current price range? For the week of May 19th to May 23rd, several reports will be released including: Minutes of the last FOMC meeting, U.S new and pending home sales, Yellen’s speech, minutes of RBA’s policy meeting, Canada’s core retail sales, Euro Zone Manufacturing PMI, U.S jobless claims, and China’s flash manufacturing PMI.    

The price of gold rose by 0.45% last week; conversely, the average price reached $1,296.70/t. oz which was 0.02% above than last week’s average rate. Gold ended the week at $1,293.40 /t. oz.

The price of silver also increased by 1.1%; further, the average weekly rate was $19.51/t oz, which was 0.90% above last week’s rate.

In the chart below are the normalized prices of precious metals during May (normalized to 100 as of April 30th). The prices of gold and silver have remained nearly unchanged on a monthly basis.

Gold and silver Chart 2014  May 18The ratio between the two precious metals also remained between 66 and 68, as indicated in the chart below. This could mean that both metals maintained their relative price.

Gold  to silver ratio Chart 2014  May 18Currencies / Precious Metals Correlations – May Update

During last week, the Eur/USD currency pair slipped by 0.47% to 1.3694. Conversely, the U.S dollar depreciated against other currencies such as yen and Canadian dollar by 0.35% and 0.34%, respectively. The correlations among gold, silver and leading currencies pairs have weakened in recent weeks, e.g. the correlation between the Aussie/USD and gold price is only 0.23 during May. The chart below shows the linear correlations among precious metals and top currencies pairs.

Correlation Gold and EURO USD 2014 May 18Based on the above, the unclear trend in the forex market also seems to have little effect on the progress of precious metals in recent weeks.

Herein is a short overview showing the main decisions, reports and events that will come to fruition during May 19th to 23rd and may affect the bullion market.

Let’s breakdown the main events, speeches and reports by leading economies:

U.S

The main event of the week will be the release of the minutes of the last FOMC meeting. Back at the end of April, the FOMC meeting tapered again its asset purchase program by $10 billion to $45 billion. This news seems to have had a short adverse effect on the prices of gold and silver. The upcoming minutes might shed some light on this decision, the FOMC’s future monetary steps and especially the decision process about setting the timing for raising its interest rate;

This week, several financial U.S economic reports will be released including: new and existing home sales, and jobless claims. If these reports show the U.S economy is progressing, then they could drag back down the prices of gold and silver.

Europe

This week, the manufacturing PMI flash estimate for leading EU economies, German Ifo business climate index, Great Britain retail sales, GB CPI, and GB GDP Q1 2014 estimate will be released this week. Moreover, Bank of England will publish its cash rate. These news items could affect the Euro and British pound, which could partly affect the gold and silver.

Asia

Bank of Japan will decide of its monetary policy. If the BOJ changes its policy by expanding its monetary easing, this could bring back down the Japanese yen against the U.S dollar, which might also partly contribute to the progress of precious metals prices.

During last week, the Indian Rupee jumped up against the US dollar. If the rupee continues to appreciate, it could increase the demand for gold and silver in India.

In China, the manufacturing PMI flash estimate by HSBC for June will be released this week; it could shed some light on China’s growth.

Finally, during the previous week, gold holdings of SPDR gold trust ETF inched down by 0.11%. The ETF is down by 2.4% since the beginning 2014. Gold holdings were at 781.985 tons by the end of last week. If the ETF’s gold holdings keep falling, this may signal the demand for gold as an investment is softening.

Takeaway

The main events of the week will revolve around the minutes of the FOMC meeting. Further, the publications of the U.S housing figures could indicate the progress of the housing market. Finally, the manufacturing PMI of China and Europe could also play a secondary role in pressuring the prices of bullion.  Based on the upcoming news and recent developments, I guess the volatility of gold and silver is likely to further diminish and they may remain close to their prices. I remain neutral.

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