Following the anticlimax from the FOMC’s meeting a couple of weeks back, the prices of gold and silver didn’t do much during last week. In the U.S, several reports came out and didn’t offer a clear picture regarding its: Jobless claims slightly decreased by 5k to reach 310k; the GDP growth rate for the second quarter remained at 2.5%; several housing figures came out last week: Pending home sales index declined during August, while new home sales rose, as expected, by 7.9%; finally, new orders of durable goods inched up by 0.1% to reach $224.9 billion. These news items didn’t seem to affect precious metals prices.
Will gold and silver prices rally this week? Here is a short outlook for September 30th to October 4th including: U.S non-farm payroll report, ECB’s cash rate decision, Bernanke’s speech, U.S manufacturing PMI, China’s manufacturing PMI, and U.S. jobless claims.
The price of gold slightly rose by 0.44% last week; further, the average price reached $1,328.18 /t. oz which was 0.06% above last week’s average.
On the other hand, silver price slipped by 0.46%; the average weekly rate was $21.74/t oz – 1.52% below last week’s rate.
Herein is a short overview showing the main reports and events that will take place during September 30th to October 4th and may affect bullion prices.
For the upcoming week, let’s overview the main publications and events broken down to the leading economies:
The hype over the FOMC’s no-tapering decision seems to have passed as the precious metal market has cooled down. This anticlimax has left the prices of gold and silver nearly unchanged during last week. Looking forward, the speculation is likely to reheat as we will get closer to the end of the year and the last FOMC meeting for 2013.
The chart below shows the sharp rise in Google’s trend for the word “tapering”.
As seen above, the peak has reached during September 2013.
In the meantime, the developments in the U.S regarding passing the budget, funding Obamacare and raising the debt ceiling again are likely to raise investors’ concerns, which may benefit gold and silver markets. Further, the upcoming U.S reports including manufacturing PMI, non-farm payroll report and jobless claims could also affect bullion prices. If these reports don’t meet expectations, they could lead to a rally of gold and silver prices.
The Euro remained nearly unchanged against the USD on a weekly scale. The flatness of the Euro/USD currency pair may have also contributed to the unclear trend of gold and silver prices. Next week, the ECB will decide its rate decision. The current expectations are that ECB will keep its rate unchanged. If ECB lower’s its cash rate, this may pressure down not only Euro but also precious metals prices. Other reports that will come out next week such as EU CPI, German retail sales, and Spain’s unemployment rate could also affect the path of the Euro.
China and India
In India, the leading country in importing gold, the Rupee slightly rose against the USD during last week. If the Rupee continues to appreciate against the USD, this could pressure up gold and silver prices.
China’s economic improvement is likely to suggest growth in demand for gold and silver; this trend may keep gold and silver prices from further plummeting. The upcoming two manufacturing PMI estimates for September could signal the economic growth of China.
Finally, gold holdings of SPDR gold trust ETF fell again for the fourth consecutive week. During the month, the ETF’s gold holdings declined by 1.63%. The ETF was also down by 32.93% since the beginning of the year (up-to-date). Current gold holdings are at 905.99 tons. If the ETF’s gold holdings keep decreasing, this will signal the demand for gold as an investment is softening.
I guess gold and silver may rally this week especially if U.S reports including non-farm payroll don’t meet expectations. Looking further forward, however, I don’t think gold and silver will do much during October and November, which leaves me neutral regarding the bullion market. With the FOMC’s monetary policy meeting in the rear view mirror, I think gold and silver may remain relatively flat with a slow descent as they did back at the beginning of the year.
The forex market hasn’t played a significant role in the precious metals market in the past several weeks as the correlations among leading currencies pairs and bullion rates have weakened.
The upcoming turbulence ahead with respect to the budget talks and debt ceiling could help pull up gold and silver over short period of time. Moreover, the potential rise in demand for gold in China and India could also contribute to the recovery of gold and silver prices. But over long period of time the general trend is likely, in my opinion, to remain a slow decline.
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