Gold and Silver Prices Outlook for April 1-5

Gold and silver resumed their downward trend and slightly declined during most of last week. The latest developments, which stir up the Euro and other risk related currencies, from Cyprus were that uninsured deposits will suffer a haircut of 60%. Despite the high volatility in the forex markets, the Euro/USD also slightly declined during last week. Last week it was reported that the U.S GDP for the fourth quarter was slightly revised up to 0.4%. The progress of the U.S economy may have also contributed to the decline in precious metals prices.  Will gold and silver continue to fall next week? Here is a short outlook for April 1st to April 5th; this includes a fundamental analysis of the main reports, events and decisions that will unfold during the week and may affect precious metals including: U.S non-farm payroll report, Canada’s trade balance, Australia’s retail sales, ECB rate decision, BOE, RBA and BOJ monetary policy meetings, U.S manufacturing PMI, Great Britain current accounts, Bernanke’s speech, RBA Governor speech, and U.S. jobless claims.  

Gold fell last week by 0.7%; moreover, the average rate reached $1,599.2 /t. oz which was 0.59% below last week’s average rate. Gold ended the week at $1,594.8 /t. oz.

Silver also declined last week by 1.32%; further, the average rate decreased by 1.18% to reach $28.52/t oz compared to last week’s average.

The weekly report presents a broad overview of the main reports, speeches and decisions that may affect gold and silver next week between April 1st and April 5th. These include the above-mentioned news items such as: U.S non-farm employment report, Bernanke’s speech, U.S manufacturing PMI, Spain’s ECB, BOE, BOJ, and RBA rate decisions, U.S and Canada’s trade balance reports, and U.S. jobless claims (just to name a few).

In conclusion, after the news and speculations around Cyprus’s bailout have eased a bit, the market volatility in the forex markets has subsided. The moderate rally of precious metals a couple of weeks back may have been partly stemmed from the rise in the demand for safe haven investments. This rally, however, seems to have ended for now. Moreover, even the Euro only slightly declined during last week. So future developments related to Cyprus are likely to have little effect precious metals and forex markets. So let’s turn to other news items that might affect the direction of precious metals.

Bernanke’s upcoming speech isn’t likely to stir up the precious metals markets. The Federal Reserve continues with its $85 billion a month of long term assets. This program is likely to pull up the U.S money base. But for now this program doesn’t pressure up the core inflation in the US and the US dollar remains relatively strong compared to other leading currencies.  This lowers the demand for gold and silver as a protection against the deviation of USD.  The SPDR gold trust ETF holdings continue to decline: the ETF gold hoards fell by 3% during March. This serves as another indication for the decline in demand for gold.

The long term securities yields slightly declined during the month. This implies the market sentiment is becoming more bearish. In the U.S, the main reports to be published this week include: manufacturing PMI, non-farm payroll report and jobless claims; these reports could affect the USD and precious metals rates. If these reports will show signs of growth, they could drag down precious metals.

If the gold and silver trading volumes will rise, this could raise their price volatility during the forthcoming week. In India, if the Rupee will continue to depreciate against the USD, as it did during the previous week; it may adversely affect the demand for gold in India. Finally, if the Euro, Aussie dollar, Canadian dollar and other currencies will trade down against the USD, they could also adversely affect gold and silver. Based on the above, my guess is that gold and silver will resume their downward trend and moderately fall next week.

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