During last week, gold and silver prices slightly declined as the recent developments in Greece, Spain and Italy that included riots against austerity measures may have pulled down not only bullion rates but also the Euro. By the end of the week, the release of Spain’s budget for 2013, which introduced, according to the Spanish government, austerity measures that are with accordance to the EU guidelines, may have contributed to the rally of the Euro and precious metals rates. There were several reports that were published during the previous week: the U.S GDP growth rate was revised down to 1.3%; U.S new home sales declined in August by 0.3%; U.S consumer confidence index rallied in September; U.S jobless claims declined by 26k to 359k. This mixed signal regarding the development of the U.S economy may have contributed to the little movement of bullion rates.
The FOMC decision to launch QE3 is likely to resurface this week as Bernanke is set speak on the Fed’s monetary policy; the minutes of the recent FOMC meeting will be published. These two items could affect gold and silver rates during the week.
Here is a short outlook for October 1st to 5th; this includes a fundamental analysis of the main publications and events that may affect precious metals markets such as: U.S non-farm payroll report, ECB, BOJ, RBA and BOE interest rate decision, U.S manufacturing PMI, and U.S. jobless claims.
Gold edged down during last week by 0.26%; further, during said time the average price reached $1,767.8 /t. oz which is also 0.26% below the previous week’s average. Gold finished at $1,773 /t. oz.
Silver also slipped on a weekly scale by 0.18%; further, the average rate decreased by 1.09% to reach $34.22/t oz compared to the previous week’s average rate.
The Euro also decreased against the U.S dollar by 0.94% (on a weekly scale); further, other “risk” currencies such as the Australian dollar also depreciated against the U.S dollar by 0.74%. The deprecation of the Euro, Canadian dollar and AUD may have contributed to the decline of precious metals. The correlation between the Euro/USD and precious metals remains mid-strong and positive: during September the correlation between Euro/USD and gold reached 0.60 and between USD/Canadian dollar and gold the correlation was -0.624. This means if the Euro and other “risk” will continue their downward trend, this could further impede gold and silver from rising during the following week.
In the video below there is a broad overview of the main publications, speeches and events that may affect gold and silver prices between October 1st and October 5th. These include the above-mentioned news items such as: Bernanke’s speech, minutes of FOMC meeting, U.S non-farm payroll report, ECB, BOJ, RBA and BOE interest rate decision, U.S manufacturing PMI, and U.S. jobless claims (just to name a few).
In conclusion, I guess gold and silver could resume their upward trend especially if the minutes of the FOMC meeting and Bernanke’s speech will contribute to the speculations that the Fed could consider additional monetary steps in the near future and if the U.S economy will continue to show little progress. In this regards, the upcoming reports regarding the U.S economy include the U.S non-farm payroll report and manufacturing PMI; they could pull up precious metals rates if these reports will show little growth. This, in turn, could raise the chances of Fed loosening up its monetary policy by raising the target inflation or intervening in the forex market or pegging the long term yields to a low rate or other. On the other hand the uncertainty around Europe could curb the bullion rates’ rally: If the ECB will lower its rate again this could pull down the Euro. The progress in Europe including the budget issues in Spain and Greece are likely to keep the volatility high of the Euro. Until Spain will make the formal request to start the ECB bond purchase program, this is likely to keep pulling down the Euro, which means other “risk currencies” and commodities prices are likely to follow. If China will introduce additional measures to jump-start its economy, this could also help rally commodities rates. The appreciation of the Indian Rupee is likely to raise the demand for gold in India, the biggest importer of gold. Finally, if the Euro, Aussie dollar, Canadian dollar and other exchange rates will continue to trade down against the USD, this could also adversely affect precious metals.
For further reading: