The prices of gold and silver changed direction again last week and edged down. Moreover, the high volatility of precious metals from the beginning of the month has eased down during last week. Will this low volatility continue during this short week? This week the U.S will celebrate Thanksgiving; this could lower the trading volume in all major markets and thus may raise the volatility by the end of the week.
Last week, the minutes of the recent FOMC meeting didn’t reveal any information regarding the Fed’s next step. Further, Bernanke’s speech also didn’t seem to affect the bullion market. The Euro group is likely to decide on the Greek bailout this week. During last week, several other reports were published that may have slightly affected the forex and precious metals: the U.S jobless claims sharply increased by 78k to reach 439k; the Philly Fed index declined to -10.7, plausibly due to the adverse effect Hurricane Sandy on the region; U.S core PPI edged down by 0.2%, while the U.S core CPI increased by 0.2%. During last week, the Euro/USD edged up by 0.26%; alternatively, the Aussie dollar depreciated against the USD by 0.46%. This mixed trend and little movement may have contributed to the low volatility of precious metals rates.
Here is a short projection for November 19th to November 23rd; this includes a fundamental analysis of the main publications and speeches that may affect bullion markets including: Euro-group meeting, housing starts and building permits, U.S existing home sales, Bernanke’s speech, RBA minutes of recent monetary policy meeting, China’s flash manufacturing PMI, BOJ rate decision, Spain’s bond sales, German flash manufacturing PMI, and U.S. jobless claims.
Gold changed direction and declined during last week by 0.94%; conversely, during said time the average rate reached $1,722.86 /t. oz which is also 0.53% higher than the previous week’s average. Gold finished at $1,714.7 /t. oz.
Silver also declined during last week by 0.71%; on the other hand, the average rate declined by 2.05% to reach $32.59/t oz
The Euro edged up against the U.S dollar by 0.26% (on a weekly scale); conversely, some “risk” currencies such as the Australian dollar slightly depreciated against the U.S dollar by 0.46%. Perhaps the mixed trend in the forex market, as the Euro rose (against the USD) while the Aussie and the Yen depreciated, may have contributed to the little movement of precious metals rates during last week. The correlation between the Euro/USD and precious metals has weekend during the week but is still mid-strong and positive: during the past month the correlation between Euro/USD and gold reached 0.45 and between AUD/USD and gold the correlation was 0.43. Thus, if the Euro and other “risk” will rise during the upcoming week, this may also 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 November 19th and November 23rd. These include the above-mentioned news items such as: Euro-group meeting, housing starts and building permits, U.S existing home sales, Bernanke’s speech, China’s flash manufacturing PMI, BOJ rate decision, German flash manufacturing PMI, and U.S. jobless claims (just to name a few).
In conclusion, I guess gold and silver will moderately rise during the week. There might be a rise in the volatility on account of the low trading volume due to the upcoming U.S Holiday. Moreover, it’s worth mentioning that in the past three years the prices of gold and silver rose during Thanksgiving week and then plunged on Black Friday. If this pattern will continue (obviously this pattern might not be significant), it could suggest precious metals will rise during the week only to fall on Friday. The upcoming Euro-group Summit could affect the Euro if the EU ministers of finance will decide to approve the next bailout for Greece. Last week’s Euro-group Summit may have only slightly affected the Euro. The upcoming reports regarding the U.S economy include the housing start and existing home sales, could affect the USD and commodities prices if these reports will different than the current expectations. Bernanke’s speech could also affect the forex and commodities markets if he will talk about the future plans of the Fed, especially in regards to the U.S fiscal cliff. Last week, Bernanke’s speech didn’t invoke a reaction in the precious metals market. The upcoming publication of China’s manufacturing PMI could affect major commodities. If the PMI will pass the 50 point mark it could positively affect commodities prices. If BOJ will expand its monetary policy it could affect the yen and major currencies pair that could also affect commodities. If the Indian Rupee will continue to depreciate against the USD, it may lower 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 further appreciate against the USD, this could also pull up precious metals.
For further reading: