The prices of gold and silver slightly declined during last week. The volatility of precious metals has subsided during last week but might pick up in this week as the last FOMC meeting for the year will be held during this week. Last week several U.S reports were published and may have had a moderate effect on precious metals markets. These reports include: the manufacturing PMI declined below 50, which means the manufacturing sectors in the U.S have contracted during last month; the U.S jobless claims decreased by 25k to reach 370k; finally, the non-farm payroll report was better than many had expected as employment grew by 146k, even though previous months’ employment figures were revised down. Will gold and silver break out of their range this week? Here is a short outlook for December 10th to 14th; this includes a fundamental analysis of the main publications and events that may affect precious metals including: FOMC meeting, EU Summit, U.S trade balance report, China’s new loans, U.S retail sales, U.S CPI and PPI, Canada’s trade balance, and U.S. jobless claims.
Gold price declined during last week by 0.37%; moreover, during the week, the average rate reached $1,702.44 /t. oz Gold ended the week at $1,704.5 /t. oz.
Silver also declined during last week by 0.39%; moreover, the average rate also decreased by 2.29% to reach $33.1/t oz.
The chart below shows the relation among USD, precious metals and changes in U.S employment (figures are as reported on the day of the publication). It shows a mid-strong negative relation between the changes in U.S employment and bullion prices: as employment expands, precious metals tend to fall. Despite this relation, on Friday both precious metals edged up even though the USD slightly appreciated against major currencies including the Japanese yen.
The Euro slipped against the U.S dollar by 0.45% (on a weekly scale); on the other hand, other “risk” currencies such as the Australian dollar appreciated against the U.S dollar by 0.58%. The correlation between the Euro/USD and precious metals has weakened again during last week but is still mid-strong and positive: during recent weeks the correlation between Euro/USD and gold reached 0.32 and between AUD/USD and gold the correlation was also 0.36. Thus, if the Euro and other “risk” will rally during the week, this may positively affect gold and silver.
In the video below there is a broad overview of the main publications, speeches and events that may affect gold and silver prices between December 10th and December 14th. These include the above-mentioned news items such as: FOMC meeting, EU Summit, BOE Governor’s speech, U.S trade balance report, China’s new loans, U.S retail sales, Japan’s GDP for Q3, U.S CPI and PPI, Canada’s trade balance, and U.S. jobless claims (just to name a few).
In conclusion, I guess gold and silver will change direction and slightly rise. Moreover, the volatility might increase during the week as it entails many news items and events most notably the FOMC meeting. It will most likely come down to the decision of the FOMC. Many expect the Fed will decide to expand the monetary plan, due to the sluggish progress of the U.S economy and the little progress in the discussion in Congress regarding the austerity plans to avoid the fiscal cliff. My guess, even if the FOMC will decide to expand its operation twist (it will end this month) or expanding the QE3 to other securities, it will have little sustainable effect on gold and silver prices.
The table below shows the reaction of gold and silver prices to the decisions of the FOMC during 2012.
Back in September the FOMC decision to launch QE3 had a short term effect on precious metals prices. Moreover, this launch seem to have had little effect (up to date) on the U.S economy as the inflation remained stable, the housing market is slowly expanding and the employment is also moderately rising. In any case, if the Fed will expand its monetary policy or even hint to the fact, this could pull up gold and silver, even if for the short term. The upcoming reports regarding the U.S economy include the trade balance report, retail sales and jobless claims, could affect the USD and commodities prices: if these reports will present an ongoing expansion in the U.S economy, they could pull back precious metals prices. The upcoming publication of Canada’s trade balance report could affect major commodities via its currency. The same goes for the publication of the Japan’s GDP for the third quarter. China’s new loans and manufacturing PMI could affect commodities prices via expanded change in the demand for commodities in China. If the Indian Rupee will appreciate against the USD, it may pull up the demand for gold in India, among the leading consumers of gold. Finally, if the Euro, Aussie dollar, Canadian dollar and other risk currencies will appreciate against the USD, they could also positively affect precious metals.
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