The precious metals market has stabilized in the past couple of weeks after the September FOMC meeting. This week, however, the publication of the minutes of that FOMC meeting could reignite the gold and silver market. Furthermore, the recent U.S government shutdown has raised the uncertainty in the markets and has also resulted in the non-farm payroll report not getting published on Friday. Despite the shutdown several U.S reports were published last week: U.S jobless claims remained stable at 308k; manufacturing PMI slightly rose to 56.2%, while non- manufacturing PMI slipped to 54.4. ADP estimated 166k private jobs added, which is close to last month’s growth. Finally, in India, gold imports may further drop on account of higher taxes on imports. Will gold and silver prices resume their downward trend this week? Here is a short outlook for October 7th to October 11th including: Minutes of FOMC meeting, China’s new loans, U.S consumer sentiment, Canada and Australia’s employment reports, China’s trade balance, German factory orders, and U.S. jobless claims.
The price of gold declined by 1.29% last week; further, the average price reached $1,312.06 /t. oz which was 1.21% below last week’s average rate. Gold ended the week at $1,309.70 /t. oz.
The price of silver slightly rose by 0.21%; moreover, the average weekly rate was $21.63/t oz, which was 0.48% below last week’s.
Herein is a short overview showing the main reports and events that will take place during October 7th to October 11th and may affect bullion prices.
For the forthcoming week, let’s overview the main publications and events broken down to the leading economies:
Following the September FOMC meeting, the hype over the meeting could rise again this week with the publication of the minutes of the last meeting. The no-tapering decision had short term effect on the prices of gold and silver but the in the bonds market long term treasuries rates fell down. Some suspect the decision was close and could have gone in the other direction (i.e. tapering QE3). The forthcoming minutes might offer some additional information behind the Fed’s recent decision and how close the decision was. This could also offer some insight behind the next two FOMC meetings that will take place later this month and in December. I still suspect the Fed will maintain its policy unchanged at least until the end of the year.
The government shutdown has gone for a week and could continue until the Senate and Congress reach an agreement with the President regarding next year’s budget. This situation resulted in no government publications to be released such as non-farm payroll. This alone could also affect FOMC members to hold off their decision about tapering until they will have clear data regarding the progress of the U.S economy. Moreover, this shutdown could eventually play in favor of bullion investors: The uncertainty around the U.S budget and the debt ceiling could pull up the demand for safe haven investments such as gold and silver.
The progress of the U.S economy may also affect the forex and commodities markets: Next week, the consumer sentiment, and jobless claims reports will be published. If these reports don’t meet expectations, they could pull up gold and silver prices.
The Euro slightly rose against the USD on a weekly scale. Next week, the ECB President will give a couple of speeches that could affect the Eur. Moreover, several reports will be published including Germany factory orders and German industrial production. These reports could also affect the path of the Euro, which tends to be correlated to gold and silver.
China and India
In India, a recent report shows gold imports have declined and may further fall as the government raised taxes on gold imports. But this might not be the whole story, another report suggests (thanks to @Silverbull21 on twitter for the link) that unofficial gold imports are rising in India due to the high taxes – this could mean total gold imports (official and unofficial) are actually stable. In any case, in such cases, this could keep gold price from further falling. Further, the Rupee rallied against the USD during last week. If the Rupee continues to appreciate against the USD, this could pull up gold and silver prices.
Next week several reports regarding China will come out including trade balance and new loans. If these reports show progress, they could also suggest the demand for commodities including gold and silver in China will rise.
Finally, gold holdings of SPDR gold trust ETF dropped again for the fifth consecutive week. During the past several weeks, the ETF’s gold holdings declined by 2.28%. The ETF was also down by 33.37% since the beginning of the year (up-to-date). Current gold holdings are at 899.98 tons – the lowest level in years. If the ETF’s gold holdings keep falling, this will signal the demand for gold as an investment is further softening.
I guess gold and silver may resume their downward trend this week especially if the minutes of the last FOMC meeting reveal the decision to taper QE3 was very close. Looking forward, however, I don’t think gold and silver will do much during the month, which leaves me neutral regarding the bullion market for the month. The uncertainty around the U.S budget and debt ceiling could play in favor of gold and silver, but it won’t last long.
Finally, the forex market hasn’t affected much precious metals market as in previous months as the correlations among leading currencies pairs and bullion rates have weakened.
For further reading:
- Weekly Outlook of Financial Markets for October 7-11
- Gold and Silver Outlook for October 2013
- Do Gold and Silver protect you from Inflation?
- Is the Golden Era of Gold Over?
- Will Gold Recover from its Recent Fall?