The prices of gold and silver remained nearly flat during most of the week; they only slightly rose on a weekly scale as the U.S holiday may have contributed to the low volatility in the markets. During last week it was reported that U.S jobless claims decreased by 10k to reach 316k; building permits increased by 6.2% during October. But not all the news items were positive: Consumer confidence index fell by 2 percentage points; pending home sales declined by 0.6%; new orders of durable goods decreased by 2% during last month. These reports paint an unclear picture regarding the progress of the U.S economy. This mixed signal may have contributed to the unclear trend in bullion market. Will gold and silver prices continue to fall this week? Here is a short forecast for December 2nd to December 6th including: U.S non-farm payroll report, ECB, RBA, BOC and BOE rate decisions, U.S and China’s trade balance, U.S GDP for the third quarter, Ben Bernanke will give a speech, U.S manufacturing PMI, U.S factory orders, Germany factory orders, and U.S. jobless claims..
Gold price slightly increased by 0.51% last week; on the other hand, the average price reached $1,241.74 /t. oz which was 1.32% lower than last week’s. The price of silver also rose by 0.69%; conversely, the average weekly rate was $19.81/t oz, which was 1.51% below last week’s.
Herein is a short overview showing the main reports and events that will come to fruition during December 2nd and December 6th and may affect precious metals prices.
Let’s breakdown the main events of reports by leading economies:
Following a slow week in terms of volume of trade and reports release, this week will be different: Many U.S reports will come out and could offer some additional information regarding the progress of the U.S economy. If these report show progress, they could drag further down the prices of gold and silver. The forthcoming U.S data including new home sales, non-farm payroll report, non-manufacturing and manufacturing PMI indexes, GDP for the third quarter, factory orders, trade balance and jobless claims. The main reports are related to the labor and manufacturing sectors. If the labor market continues last month’s improvement and number of jobs added will exceed expectations, this could drag down gold and silver (as was the case last month).
The Euro didn’t do much last week and remained relatively flat against the USD even though other currencies such as Aussie dollar and Japanese yen depreciated against the USD. The stagnation of Euro may have also slightly contributed to stagnation of gold and silver prices. Next week, several reports will come out next week including EU biyearly economic outlook, German factory orders, and ECB rate decision. ECB is likely to keep the rate unchanged, but any big headlines from the press conference from ECB President Draghi could stir up the Euro again. The upcoming reports could affect the Euro/ USD, and, in the process, may also affect gold and silver. The linear correlation between Euro/USD and gold price was 0.47 during November – a positive and mid-strong correlation.
India and China
China’s economy hasn’t improved much in the past several months; HSBC will update its latest manufacturing PMI index. If the index falls, this could negatively affect prices of commodities: This may soften the future demand of China for commodities in the future. Additional report will come out by the end of the week including trade balance, which could also indicate of any changes in China’s demand for commodities.
In India, the Indian Rupee remained nearly flat against the USD during last week. But during the past month the Rupee depreciated against the US dollar by roughly 1.1%. The higher import taxes and the weaker Rupee contributed to the softer demand for precious metals even during the wedding and festival season. If this trend persists, this could also reduce the prices of gold and silver.
Finally, gold holdings of SPDR gold trust ETF declined again by 1.06% last week. Moreover, during last month, the ETF’s gold holdings declined by 3.3%. The ETF was also down by 37.58% for the year (up-to-date). Current gold holdings are at 843.206 tons. If the ETF’s gold holdings continue to fall, this may signal the demand for gold as an investment is declining.
In conclusion, the busy week ahead in the U.S and Europe is likely to revive the market and the volatility of gold and silver prices is likely to rise. The ongoing depreciation of leading currencies against the USD is likely to keep gold and silver from recovering. If the upcoming U.S report in manufacturing and labor markets are better than anticipated, then they are likely to drag down gold and silver. Finally, the slow progress in India and China is also likely to curb down the demand for gold and silver. Therefore, I suspect gold and silver will resume their downward trend.
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