The prices of gold and silver changed direction last week and rose. Will this rally continue this week? The U.S Presidential elections are over. The results of the elections may have contributed to the recovery of bullion rates. Back in November 2007, during the 2008 elections, the prices of precious metals also increased. The next step for the U.S is tackling the “fiscal cliff” by the end of 2012. This situation is likely to pull up bullion in the weeks to follow.
There were several reports published last week that may have also affected the forex and commodities: the U.S jobless claims declined again by 8k to reach 363k; American trade deficit declined on account of the sharp rise in exports of goods. During last week, the Euro/USD declined by 0.66%; alternatively, the Aussie dollar appreciated against the USD by 0.21%. This mixed trend may have contributed to the high volatility of bullion rates during last week.
Here is a short projection for November 12th to November 16th; this includes a fundamental analysis of the main publications and speeches that may affect precious metals markets including: U.S PPI, Euro-group meeting, publication of minutes of FOMC meeting, Philly Fed survey, Bernanke’s speech, Euro Area Industrial Production, U.S Federal budget update, EU CPI, and U.S. jobless claims.
Gold changed direction and increased during last week by 3.32%; further, during said time the average rate was 0.45% higher than the previous week’s average rate. Gold finished at $1,730.9 /t. oz.
Silver also rose during last week by 5.64%; further, the average rate rose by 0.43% to reach $31.93/t oz compared to the previous week’s average.
The Euro slipped again against the U.S dollar by 0.66% (on a weekly scale); conversely, some “risk” currencies such as the Australian dollar slightly appreciated against the U.S dollar by 0.21%. Perhaps the mixed trend in the forex market, as the Euro and Canadian dollar rose (against the USD) while the Aussie and the Yen appreciated, may have contributed to sharp movement of precious metals rates during last week. The correlation between the Euro/USD and precious metals remains mid-strong and positive: during the past month the correlation between Euro/USD and gold reached 0.53 and between AUD/USD and gold the correlation was 0.54. Thus, if the Euro and other “risk” will dwindle during the upcoming week, this may also adversely 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 November 12th and November 16th. These include the above-mentioned news items such as: U.S PPI, Euro-group meeting, publication of minutes of FOMC meeting, Philly Fed survey, Bernanke’s speech, Euro Area Industrial Production, U.S Federal budget update, EU CPI, and U.S. jobless claims (just to name a few).
In conclusion, I guess gold and silver will change direction from last week and perhaps will moderately decline during this upcoming week. There might be a drop in the volatility following the sharp shifts during last week due to the effect the U.S Presidential elections had on the markets. The upcoming Euro-group Summit could affect the Euro if there will be any big headlines coming out of it. The meting will probably revolve around Greece’s next bailout package. Last week’s Euro-group Summit didn’t invoke a reaction in the forex and commodities markets, therefore I suspect this week’s Summit will also have little to no effect on the forex and commodities markets. The upcoming reports regarding the U.S economy include the Philly Fed index, retail sales, CPI and PPI could affect the USD and commodities prices if these reports will be much different than many had anticipated. If the upcoming publication of minutes of October’s FOMC meeting will reveal some insight about the future plans of the FOMC in the December 2012 meeting, it could affect bullion markets. I suspect, however, this report will have little effect on the market. Bernanke’s speech could also affect the forex and commodities markets if he will talk about the future plans of the Fed, especially in relation to the fiscal cliff the U.S economy is facing. The recent depreciation of the Indian Rupee may lower the in demand for gold in India, among the leading consumers of gold. Finally, if the Euro, Aussie dollar, Canadian dollar and other risk currencies will depreciate against the USD, this could also pull down precious metals.
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