Precious metals prices resumed their downward trend during November. The minutes of the penultimate FOMC meeting of the year revealed its members discussed the importance of conveying to the public that tapering QE3 (if and when it starts) won’t imply the Fed will also consider reducing its cash rate in the near future. In any case, some analysts think the FOMC has left the door open on tapering QE3 in December – the last meeting of the year. Looking forward, will gold and silver bounce back this month? Let’s breakdown the upcoming events, decisions and reports that may affect precious metals; let’s start, however, with a short analysis of November.
Gold and Silver Prices November 2013
Gold and silver prices sharply fell mostly during the last few weeks of November. Their tumble coincided with the sharp depreciation of the Aussie dollar and Japanese yen against the USD. By the end of November, the price of gold decreased by 5.52%. The price of silver plummeted by 8.4%.
Let’s divide November into two parts: the table below divides the month at November 6th. I divide the month to demonstrate the shift in pace of gold and silver prices; during the first part of November, gold slipped by 0.4%; silver, by 0.4%. During the second part of November, however, gold plummeted by 5.1%; silver price, by 8%.
During the first part of November, the U.S dollar appreciated against the Euro and Japanese yen but slipped against the Aussie dollar and Canadian dollar; the Euro/USD and USD/Yen currency pairs are usually strongly linked with gold and silver. During the second part of the month, the Aussie dollar and Japanese yen sharply depreciated against the US dollar.
The chart below presents the shifts of gold and silver during November, in which the prices are normalized to 100 on October 31st 2013.
The ratio of gold to silver (gold price/silver price) slightly rose during the month. The ratio increased as silver price has under-performed gold price. During the month the ratio ranged between 60 and 62.
Here are several factors that may have adversely affected gold and silver prices during the month:
- The renewed speculations around the FOMC tapering QE3 in December;
- Based on the recent U.S non-farm payroll report, 204k jobs were added – this was higher than estimated and may have adversely affected gold and silver prices;
- The depreciation of several currencies such as Japanese yen and Aussie dollar against the USD during the second part of November may have pulled down gold and silver prices;
- The decision of ECB to cut down its cash rate by 0.25pp to 0.25%;
- The drop in U.S jobless claims during November;
- The depreciation of the Indian Rupee may have dragged the demand for gold in India, among the leading importers of gold;
- Several U.S reports were positive: Retail sales slightly rose by 0.4% during November; manufacturing PMI rose to 57.3% during November. These reports suggest the U.S economy is progressing and thus may have pulled down precious metals;
- The low rise in India’s precious metals demand during Festival season;
- The ongoing rally of U.S equity markets that serve as an alternative investment for gold and silver;
Here are several factors that may have positively affected gold and silver during November:
- The slight appreciation of the Euro against the USD during the second part of November may have curbed down the fall of gold and silver prices;
- The decision of the FOMC to keep its policy unchanged and not taper QE3;
- The decision of BOE, BOC, and RBA to keep their respective cash rate unchanged in November;
- Several U.S reports showed little progress: Philly Fed index slipped during November; U.S consumer confidence index declined;
- The pledge of the FOMC to keep its low rates until mid 2015;
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For further reading see:
- Will Gold and Silver Tumble Further?
- Gold and Silver Yearly Outlook For 2013
- Will Gold Recover from its Recent Fall?
- Will These Gold Producers Bounce Back?
- Why Gold Isn’t Pulling Up?