Gold and Silver Prices Outlook for March 4-8

Gold and silver inched down during last week, despite their sharp rally at the first couple of days. Bernanke remained dovish in his testimony at the Hill vis-à-vis the Fed’s monetary policy; he kept defending it and stating this expanding policy could go on for a long time. In the U.S several reports were published and showed some signs of growth: the manufacturing PMI rose to 54.2 as of February; the second estimate of the fourth quarter of GDP was revised upwards to 0.1% gain; jobless claims changed direction and fell by 22k to reach 344k. The sequester came into play on March 1st. It includes a $85 billion spending reductions in 2013. Will gold and silver trend down next week? Here is a short outlook for March 4th to March 8th; this includes a fundamental analysis of the main reports, decisions and summits that may affect gold and silver including: U.S non-farm employment report, ECB rate decision, Australia’s GDP fourth quarter estimate, Canada’s employment report, BOE, BOJ, BOC and RBA rate decisions, U.S, China and Canada’s trade balance monthly update, ECONFIN meeting, and U.S. jobless claims.  

The price of gold inched down during last week by 0.03%; conversely, during last week, the average rate reached $1,589.18 /t. oz which was 0.06% above last week’s average rate. Gold ended the week at $1,572.3 /t. oz.

Silver also edged down during the previous week by 0.03%; moreover, the average rate decreased by 0.7% to reach $28.81/t oz compared to last week’s average.

The Euro fell again against the U.S dollar by 1.3% (on a weekly scale); the Aussie dollar also declined against the USD by 1.13%; the Canadian dollar depreciated against the U.S dollar by 0.52%. The correlations between these currencies pairs and bullion rates have weakened: during February-March the correlation between USD/CAD and gold was -0.17 and between Australian dollar /USD and gold the correlation reached 0.16. These correlations suggest the recent changes in the forex markets may have had a modest effect on the developments of gold and silver markets. Despite the low correlation, if the Euro and other “risk” currencies will continue to depreciate during the coming day, they might drag down 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 4th and March 8th. These include the above-mentioned news items such as: U.S non-farm employment report, ECB rate decision, BOE, BOJ, BOC and RBA monetary policy meetings and rate decisions, U.S, China and Canada’s trade balance monthly update, and U.S. jobless claims (just to name a few).

In conclusion, the main events of the week will revolve around the monetary policy meetings of the central banks of EU, Japan, England, Canada, and Australia. If any of these central banks will decide to change the policy will be unexpectedly changed by cutting rates or expanding asset purchase programs, then this could affect their respective currency and indirectly precious metals. For now, many of these banks are likely to keep their rates unchanged. Bank of Japan might augment its asset purchase program, which could affect the direction of the Japanese yen and further pull it down. Nonetheless, the recent currencies wars seem to have a moderate effect on the path of gold and silver. In the U.S the main reports to be published this week include: non-farm payroll, trade balance, and jobless claims could affect the USD and precious metals. If the reports will show signs of growth, they could adversely affect precious metals.  The FOMC’s QE3 program contributes to the rise in the U.S money base but unlike in 2008-2010 it doesn’t seem to help rally precious metals prices. The stability of the U.S inflation and the strengthening of the USD against leading currencies including Yen and Euro might be pulling away safe haven investors from investing in precious metals to protect their investment against the devaluation of the USD.

If the gold and silver trading volume will remain high this week, this could keep their price volatility high during the upcoming week. In India, if the Rupee will continue to dwindle against the USD, as it in last week; it may adversely affect the demand for gold in India. Finally, if the Euro, Aussie dollar, Canadian dollar and other risk currencies will continue to decline against the USD, they could also pull down gold and silver. Based on the above, my guess is that gold and silver will resume its downward trend next week.

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