The prices of gold and silver continued their upward trend during last week. Their rally coincided with the depreciation of the USD against the Euro and Japanese yen. The non-farm payroll report didn’t meet expectations with only 148k jobs added in September; Jobless claims slipped by 12k to 350k. The little progress in the labor market could influence FOMC members and reduce the odds of the FOMC tapering QE3 in the near future including the upcoming FOMC meeting this week. Last week, China’s flash manufacturing PMI increased to 50.9 in October – a seven month high. This positive news may have also contributed to the rally of precious metals. Will gold and silver prices further rise this week? Here is a short forecast for October 28th to November 1st including: FOMC meeting, U.S CPI, U.S and China’s manufacturing PMI, U.S retail sales, Gfk German Consumer Climate Survey, U.S PPI, and U.S. jobless claims.
Last week, gold price increased by 2.89% last week; further, the average rate reached $1,338.84 /t. oz which was 3.49% above last week’s average. Gold ended the week at $1,352.30 /t. oz.
Silver price also rose by 3.32%; further, the average weekly rate was $22.60/t oz, which was 5% above last week’s rate $21.88/t oz.
Herein is a short overview showing the main reports that will be published between October 28th and November 1st and may affect silver and gold prices.
This upcoming week, let’s review the main reports and events that will come to fruition by the leading economies:
Last week’s U.S non-farm payroll report didn’t meet expectations as only 148,000 jobs were added. The little progress in the U.S labor market along with the ongoing uncertainty around the federal budget and debt ceiling are likely to kept the FOMC’s monetary policy unchanged. The upcoming FOMC meeting isn’t likely to result in surprises and the FOMC is likely to keep its bond purchase program at $85 billion a month. This is likely to keep the prices of gold and silver from resuming their downward trend. Besides the FOMC meeting, this week several reports will be published including: retail sales, pending home sales, consumer confidence, manufacturing PMI and jobless claims. If these reports, mainly the manufacturing PMI and retail sales reports, don’t meet the current projections, this could further pull down the USD and thus pressure up gold and silver.
The Euro slightly appreciated again against the USD during last week. The ongoing recovery of the Euro/USD is plausibly related to the recent weak labor report. The correlations between Eur/USD and precious metals prices have strengthened during the month. Thus, the Euro’s rally coincided with the recovery of gold and silver. Next week, several reports will be published including: Gfk German Consumer Climate Survey and Spain’s GDP Q3 2013. These reports could also affect the Euro/ USD.
Unlike the Euro, the Canadian dollar sharply depreciated against the USD by 1.57%. The rise of gold and silver didn’t coincide with the weakness of this currency pair. Moreover, USD/ CAD has had a weak correlation with bullion prices. Therefore, this currency’s movement seems to have had little effect on precious metals prices.
Next week, Canada’s GDP monthly will come out, which could affect the USD/ CAD currency pair.
India and China
Next week, the manufacturing PMI October report will come out. If the show another rise in the manufacturing sectors in China’s, this could indicate a potential growth in demand for commodities in China including gold and silver. This news, in turn, is likely to positively affect the prices of gold and silver.
In India, the progress of the wedding and festival season is likely to keep the demand for precious metals robust. Moreover, the recovery of the Indian Rupee against the USD is also likely to pull up gold and silver prices.
Finally, gold holdings of SPDR gold trust ETF dropped again for the eighth consecutive week. During October, so far, the ETF’s gold holdings fell again by 2.62%. The ETF was also down by 35.45% during the year (up-to-date). Current gold holdings are at 872.02 tons – the lowest level in recent years. If the ETF’s gold holdings keep declining, this may signal the demand for gold as an investment continues to falls.
In conclusion, the ongoing rise in demand for gold and silver in Asia is likely to keep the prices of gold and silver from tumbling down. Moreover, next week’s reports regarding the progress of the U.S and the FOMC statement are likely to affect not only the USD but also precious metals prices. If these reports show little progress and the FOMC keeps its policy unchanged, gold and silver are likely to keep their upward trend. Finally, if the USD continues to fall against the Euro and Japanese yen, they may also contribute to the recovery of gold and silver prices.
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