Gold and silver changed course and slightly increased during last week. Their modest rally coincided with the rally of other commodities and stock markets and despite the moderate depreciation of leading currencies against the USD. Last week, ECB left the Euro cash rate unchanged. This news may have contributed to the rally of the Euro on Thursday. The next day, the non-farm payroll report came out and showed that 236 thousand jobs were added during February. The rise in employment may have pushed the Euro and other currencies down on Friday but had little effect on precious metals. Will gold and silver continue to slowly climb up next week? Here is a short outlook for March 11th to March 15th; this includes a fundamental analysis of the main reports, events and summits that may affect precious metals including: U.S retail sales report, EU Summit, Australia’s employment report, China’s new loans, U.S industrial production, Bank of Japan monetary policy minutes, U.S Federal budget, Great Britain manufacturing production, and U.S. jobless claims.
The price of gold inched up during the previous week by 0.32%; conversely, during said week, the average rate reached $1,574.84 /t. oz which was 0.9% below last week’s average. Gold ended the week at $1,576.9 /t. oz.
Silver also rose during last week by 1.66%; the average rate decreased by 0.35% to reach $28.71/t oz compared to last week’s average.
The Euro inched down again against the U.S dollar by 0.13% (on a weekly scale); the Canadian dollar also slightly depreciated against the U.S dollar by 0.19%; the yen sharply depreciated against the U.S dollar by 2.58%. Conversely, the Aussie dollar slightly increased against the USD by 0.32%. The correlations between these currencies pairs and precious rates have weakened even further: during February-March the correlation between USD/Yen and gold was -0.25 and between Australian dollar /USD and gold the correlation reached 0.15. These correlations suggest the recent developments in the forex markets may have had at best a modest effect on the changes in gold and silver markets. Despite the low correlation, if the Euro and other “risk” currencies will continue to trade down during the coming weeks, they might curb any rally of gold and silver.
The video herein presents a broad overview of the main reports, speeches and publications that may affect gold and silver between March 11th and March 15th. These include the above-mentioned news items such as: U.S retail sales report, EU Summit, Australia’s employment report, China’s new loans, U.S industrial production, Bank of Japan monetary policy minutes, and U.S. jobless claims (just to name a few).
In conclusion, the main events of the week will pertain to the recent developments in the U.S, Europe and China. The EU economic Summit might affect the forex and commodities markets if the budget talks will lead to big headlines. The ongoing deprecation of the Japanese yen may have also affected the precious metals; if it will continue, then bullion rates might be adversely affected by it. Bank of Japan will publish the minutes of the recent monetary policy meeting that could affect the direction o Japanese yen. Nonetheless, the ongoing currencies wars continue to have a very limited effect on the gold and silver. In the U.S the main reports to be published this week include: retail sales, consumer price index, producer price index, consumer sentiment, industrial production, and jobless claims; these reports could affect the USD and bullion rates. If the reports will continue to show signs of growth, they could pull down precious metals. If the CPI will show little growth in inflation, this could lower the concern of a devaluation of the USD and thus may pull down gold and silver. The FOMC’s QE3 program is raising the U.S money base, but it doesn’t seem to have a positive effect on bullion rates. The ongoing decline in the SPDR gold trust ETF holdings is another indication for the drop in demand for gold as a safe haven investment. The recent rise in long term securities yields also suggests the market sentiment is shifting to be more bullish..
If the gold and silver trading volumes will remain low this week, this could keep their price volatility low during the upcoming week. In India, if the Rupee will continue to rise against the USD, as it did during last week; it may positively affect the demand for gold in India. Finally, if the Euro, Aussie dollar, Canadian dollar and other currencies will continue to depreciate against the USD, they could also adversely affect gold and silver. Based on the above, my guess is that gold and silver will slightly decline next week.
For further reading:
- What Could Impede This Gold Company?
- Weekly Outlook of Financial Markets for March 4-8
- Gold and Silver Outlook for March
- Gold and Silver Yearly Outlook For 2013
- Choosing Between Gold and Silver