The prices of gold and silver moved in an unclear trend during last week. Their prices started off strong at the beginning of the week only to change course and plunge at the end of the week. Several U.S reports may have contributed to movement of precious metals: Non-farm payroll report showed a 175k increase in jobs during February; manufacturing PMI increased by 1.9 percentage points to 53.2. Finally, jobless clams fell by 26k to reach 323k. In the forex market, the Euro, and Aussie dollar rose against the USD, while the Canadian dollar and Japanese yen depreciated. This mixed trend may have also contributed to the recent changes in the prices of gold and silver. For the week of March 10th to 14th, several reports and events will be released such as: U.S retail sales, China’s industrial production, EU industrial production, U.S PPI, U.S federal budget, China new loans, and jobless claims.
The price of gold increased by 1.26% last week; moreover, during last week, the average price reached $1,343.70/t. oz which was 0.84% higher than last week’s average rate. Gold ended the week at $1,338.2 /t. oz.
The price of silver declined by 1.46%; further, the average weekly rate was $21.28/t oz, which was 1.32% below last week’s price.
Herein is a short overview showing the main decisions, reports and publications that will unfold during March 10th to 14th and may affect precious metals prices.
Let’s breakdown the main events by leading economies:
Last week, the non-farm payroll report was moderately positive as 175k jobs were added during February. This report tends to have a strong correlation with precious metals prices.
The table above shows the reactions of the prices of gold and silver to previous U.SNF payroll reports.
If the U.S economy continues to recover, this could pressure down precious metals.
Several reports will be released this week: Retail sales, PPI, federal budget, consumer confidence, and jobless claims. If these reports show progresses in the U.S economy, they could further drag down the prices of precious metals.
The US dollar depreciated again against the Euro and Aussie dollar, which may have pulled down precious metals. Conversely, the Canadian dollar and Japanese yen slipped against the USD. Thus, if the U.S dollar continues to weaken against the Euro and Aussie dollar; this could moderately pull up the prices of gold and silver. The correlation among AUD/USD, USD/CAD and precious metals have strengthened in the past couple of months;
The chart below shows the linear correlation among leading currencies pairs and precious metals prices.
Last week, the ECB decided to keep its rate unchanged, which may have contributed to the recovery of the Euro against the USD. This week, several reports and event will come to fruition including: EU and France’s industrial production Euro-Group Summits, ECOFIN Summit and ECB monthly bulletin. These reports and events could affect the Euro/USD, which could play a secondary role in the progress of the prices of gold and silver.
India and China
During the previous week, the Indian Rupee appreciated again against the US dollar. If this trend continues, it could positively affect the demand for precious metals in India.
In China, several reports will come out this week including new loans and industrial production. If the Chinese economy continues to slow down, this might imply the demand for commodities in this country is falling, which could also drag down gold and silver.
Finally, during the previous week, gold holdings of SPDR gold trust ETF rose again for the second consecutive week, this time by 0.19%. The ETF is up by nearly 0.5% since the beginning of the year (UTD). Gold holdings were at 805.203 tons by the end of last week – the highest level since mid-December 2013. If the ETF’s gold holdings continue to rise, this may signal the demand for gold as an investment is improving.
Last week’s reports about the U.S economy including NF payroll and manufacturing PMI could suggest the U.S economy is slowly improving. This shift might adversely affect the direction of precious metals. If the U.S economy continues to show signs of recovery, with the upcoming U.S economic reports, this could pull down gold and silver. The rally of the U.S stocks markets and the appreciation of the USD against the Canadian dollar and Japanese yen may have pressured down the demand for investments such as gold and silver. Further, if China’s economy slows down, it could suggest the demand for commodities such as gold in China will diminish. Conversely, the decline of the USD against the Aussie dollar and Euro and the rise in demand for precious metals as indicated in the improved gold holdings in GLD’s holdings might suggest the recovery of gold and silver could continue. These opposite forces could suggest gold and silver will continue to move in a mixed trend. Therefore, I’m still neutral on gold and silver for this week, with a slightly higher chance that precious metals will decline.
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