Gold and Silver Prices Outlook for October 8-12

During last week, gold and silver prices remained nearly unchanged. The Aussie dollar declined against the USD mainly due to RBA’s decision to lower the cash rate by 25pp. This development may have contributed to the unclear trend of precious metals. There were several reports that were published last week: the U.S manufacturing PMI rose to 51.5; 114k jobs were added in September according to the recent non-farm payroll report; U.S jobless claims rose by 4k to 367k. This mixed signal regarding the progress of the U.S economy may have also contributed to the unclear trend in major commodities markets. In Europe, regarding Greece and Spain may have curbed the recent rally of the Euro. Nonetheless, during the week the Euro/USD rose by 1.41%; on the other hand, the Aussie dollar fell by 1.87%. Bernanke gave a speech last weeks, and in it he assured that the Fed will keep the rates low even if the economy were to recover. The minutes of the FOMC meeting from September revealed a similar message.

Here is a short outlook for October 8th to 12th; this includes a fundamental analysis of the main publications and events that may affect precious metals markets such as: U.S producer price index, American trade balance, Euro-Council summit, G7 Summit, ECB President speaks, and China’s new loans.    

Gold edged up during last week by 0.39%; further, during said time the average reached $1,783.2 /t. oz. Gold finished at $1,780 /t. oz.

Silver nearly didn’t change on a weekly scale; on the other hand, the average rate increased by 1.68% to $34.8/t oz.

The Euro increased against the U.S dollar by 1.41% (on a weekly scale); alternatively, some “risk” currencies such as the Australian dollar depreciated against the U.S dollar by 1.87%. The mixed trend of the Euro and Australian dollar may have contributed to the unclear trend of precious metals. The correlation between the Euro/USD and precious metals remains mid-strong and positive: during September/October the correlation between Euro/USD and gold reached 0.62 and between Australian dollar/USD and gold the correlation was 0.71. This means if the Euro and other “risk” will trade up during the upcoming week, this could further pull up gold and silver.

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 8th and October 12th. These include the above-mentioned news items such as: U.S producer price index, FOMC members’ speeches, American trade balance, Australia’s employment report, Euro-Council summit, G7 Summit, ECB President speaks, China’s new loans, and U.S. jobless claims (just to name a few).

In conclusion, I guess gold and silver will not move much during the upcoming week much like last week. They may resume their rally but won’t rise by a high margin. There are several big meetings next week: Summits of the G7, Euro Council and more that could affect the forex and commodities markets, but unless there will be actual decisions regarding the Euro debt crisis or the “fiscal cliff” in the U.S, I suspect these events won’t have a substantial effect on the financial markets.  The upcoming reports regarding the U.S economy include the U.S trade balance and PPI could pull up precious metals rates if these reports will show the U.S economy isn’t progressing. This, in turn, could raise the chances of Fed introducing additional monetary in the near future.  The uncertainty around Europe could curb the recent recovery of the Euro. If ECB President will come up with big headlines, it could positively affect the Euro. Until Spain will make the formal request to start the ECB bond purchase program, this is likely to curbing the progress of 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 ongoing appreciation of the Indian Rupee is likely to raise the demand for gold in India, the largest importer of gold. Finally, if the Euro, Aussie dollar, Canadian dollar and other exchange rates will trade up against the USD, this could also positively affect precious metals.

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