Gold and silver didn’t do much during last week. Their price volatility also remained low. Several reports came out during last week: retail sales rose by 1.1% in February; jobless claims declined again by 10k to reach 332k; the PPI and CPI each rose by 0.7% during last month; the UoM consumer sentiment declined to 71.8 in March. This mixed signal about the U.S economy may have contributed to the mixed trend in precious metals prices during last week. Will gold and silver rally next week? The recent developments in Cyprus, in which Cypriot President Nicos Anastasiades eventually accepted the EU ministers’ demand and will raise 5.8 billion euros by posing a levy on every Cyprus bank deposits, resulted in pulling down the Euro on the first day of the week. Here is a short forecast for March 18th to March 22nd; this includes a fundamental analysis of the main reports and decisions that will be made and may affect precious metals including FOMC meeting, Philly fed survey, China’s manufacturing PMI, German ZEW economic sentiment, Japan’s trade balance, Canada’s retail sales, minutes of RBA meeting, U.S housing starts, and U.S. jobless claims.
Gold slightly increased during last week by 1%; moreover, during said week, the average rate reached $1,588.28 /t. oz which was 0.85% below last week’s average rate. Gold ended the week at $1,592.6 /t. oz.
On the other hand, Silver slipped during last week by 0.35%; the average rate rose by 0.68% to reach $28.9/t oz compared to last week’s average.
The Euro rose against the U.S dollar by 0.55% (on a weekly scale); the Australian dollar also appreciated against the U.S dollar by 1.7%; the yen appreciated against the U.S dollar by 0.75%. The correlations between these currencies pairs and precious rates remained weak: during February-March the correlation between USD/Yen and gold was -0.31 and between Australian dollar /USD and gold the correlation reached 0.29. These correlations suggest the recent shifts in the forex markets may have had a modest effect on the developments in gold and silver markets. Despite the weak relations, if the Euro and other “risk” currencies will continue to trade up during the coming weeks, they might pull up 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 18th and March 22nd. These include the above-mentioned news items such as: FOMC meeting, Philly fed survey, China’s manufacturing PMI, Canada’s retail sales, minutes of RBA monetary meeting, U.S housing starts, and U.S. jobless claims (just to name a few).
In conclusion, the main event of the week will refer to the upcoming FOMC meeting. If the Fed will change its outlook of the U.S economy or hint of any future plans to change its current monetary policy, this could affect not only the USD but also precious metals prices. Last time, back in January, the FOMC left its policy unchanged, which resulted in a sharp rise in gold and silver prices. The next day, however, bullion rates tumbled down. I guess that the Fed will keep its policy unchanged, especially since Bernanke continues to be dovish; this, in turn, could lead to a temporary moderate rise gold and silver prices. Up to now, the Fed’s QE3 program augmented the U.S money base, but didn’t seem to have a positive effect on precious metals prices. The ongoing fall in the SPDR gold trust ETF holdings is another indication for the decline in demand for gold as a safe haven investment. The rise in long term securities yields during the month also implies the market sentiment is becoming more bullish. In the U.S the main reports to come out this week include: housing starts, existing home sales, Philly Fed index, and jobless claims; these reports could affect the USD and precious metals rates. If the reports will continue to show signs of progress, they could drag down precious metals.
The deprecation of the Japanese yen during the month may have affected precious metals; if it will continue, then bullion prices might also follow and fall. Japan’s trade balance will be published; this report could affect the direction of the Japanese yen.
If the gold and silver trading volumes will pick up low week, this could raise their price volatility during the upcoming week. In India, if the Rupee will continue to increase against the USD, as it did during the previous 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 appreciate against the USD, they could also positively affect gold and silver. Based on the above, my guess is that gold and silver will rise next week.
For further reading:
- What Could Impede This Gold Company?
- Weekly Outlook of Financial Markets for March 18-22
- Gold and Silver Outlook for March
- Gold and Silver Yearly Outlook For 2013