Gold and Silver Prices Outlook for November 5-9

The prices of gold and silver continued last week their downward trend. Will this downward trend progress this week? The U.S manufacturing PMI edged up during October to reach 51.7%; jobless claims decreased by 9k to reach 363k. These reports may have contributed to downfall of precious metals rates. Further, the U.S non-farm payroll may have had a negative effect on precious metals prices and other commodities prices on Friday. During the last week, the Euro/USD declined by 0.83%; further, the Aussie dollar also depreciated against the USD by 0.36%. This downward trend may have contributed to the decline of bullion rates.

Here is a short projection for November 5th to November 9th; this includes a fundamental analysis of the main reports and events that may affect the bullion markets including: U.S Presidential elections, Euro-group meeting, U.S trade balance report, U.S non-manufacturing PMI, MPC rate decision, Canada’s trade balance, China’s CPI, RBA rate statement, ECB rate decision, and U.S. jobless claims.    

Gold price declined during last week by 2.14%; further, during said time the average rate was also 0.37% below the previous week’s average rate. Gold finished at $1, 675.2 /t. oz.

Silver also decreased during last week by 3.67%; further, the average rate decreased by 0.5% to reach $31.8/t oz.

The recent publication of the U.S non-farm payroll report, in which 171,000 jobs were added during October and the rate of unemployment edged up to 7.9%.

This news may have contributed to the sharp fall in the prices of gold and silver on Friday. This positive report might also lower the chances of the Fed intervening again in the financial markets.

The table below shows the relation between the number of jobs added on the day of the non-farm payroll report publication and the percent changes in the prices of gold and silver. As seen, the correlations between precious metals prices and number of jobs added are mid-strong and negative.

U.S.Labor Reports in 2012 gold price and silver prices November 2 2012

The Euro declined again against the U.S dollar by 0.83% (on a weekly scale); further, some “risk” currencies such as the Australian dollar also depreciated against the U.S dollar by 0.36%. Perhaps the fall of the Euro and Australian dollar may have contributed to the downward trend of precious metals rates. The correlation between the Euro/USD and precious metals remains mid-strong and positive: during the past several weeks the correlation between Euro/USD and gold reached 0.64 and between AUD/USD and gold the correlation reached 0.48. Thus, if the Euro and other “risk” will continue to decline during the upcoming week, this may also drag down 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 5th and November 9th. These include the above-mentioned news items such as: U.S Presidential elections, Euro-group meeting, U.S trade balance report, MPC rate decision, Canada’s trade balance, RBA rate statement, ECB rate decision, and U.S. jobless claims (just to name a few).

In conclusion, I guess gold and silver will continue their slow downward trend during this upcoming week. There might be a rise in volatility as the U.S Presidential elections could cut the trading volume. During the first week of November 2007 the prices of gold and silver hiked upon the election of Obama. Will this rally occur again? The concerns over the “fiscal cliff” and each candidate’s perceptive about the way of solving it, could influence bullion traders and thus the direction of gold and silver. The upcoming G20 meeting and Euro-group Summit could affect the forex markets if there will be any big headlines coming out of it. Last month’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 financial markets. The upcoming reports regarding the U.S economy include the U.S trade balance report and non-manufacturing PMI could affect the USD and commodities prices if these reports will be much different than many had anticipated. If the major central banks including ECB, MPC and RBA will decide to lower their cash rate this could adversely affect their respective currency, which could strengthen the USD and thus pull down gold and silver. If China’s CPI will continue to dwindle this could China’s economy isn’t expanding and could adversely affect commodities rates. The recent appreciation of the Indian Rupee may raise 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 continue to dwindle against the USD, this could also adversely affect precious metals.

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