During the previous week, gold and silver didn’t do much. Their unclear trend coincided with the mixed trend in the forex market, in which the Euro remained nearly unchanged against the USD while the Aussie dollar plunged by 3.82% against the USD. During last week, the FOMC meeting didn’t come up with big headlines. Investors are still waiting to see when and if the FOMC will pull the trigger on tapering QE3. Until then the progress of the U.S economy may influence not only forex investors but also bullion investors. In the U.S several reports were published: the GDP growth rate was 1.7%, which was lower than some had expected; non-farm payroll report showed a rise of only 162k jobs – lower than expected; jobless claims declined by 19k to reach 326k. These reports showed a mixed trend that could also partly explain the mixed trend in the precious metals market. In Europe, ECB left its policy and interest rate unchanged but ECB President Draghi reiterated his pledge to maintain low interest rates. Will gold and silver resume their downward trend this week? Here is a short outlook for August 5th to August 9th; this includes a fundamental analysis of the main events, decisions and reports that may affect precious metals markets. These include: U.S non-manufacturing PMI, China’s CPI, U.S and Canada’s trade balance, German Industrial production, and U.S. jobless claims.
The price of gold slid by 0.86% last week; moreover, the average price reached $1,317.20 /t. oz which was 0.82% below last week’s average rate.
Conversely, silver price slightly rose by 0.76%; the average weekly rate was $19.74/t oz, which was 1.96% below last week’s rate.
Herein is a short overview that shows the main publications, events and decisions that will enfold next week between August 5th and August 9th and may influence precious metals traders.
The volatility of precious metals prices remained low last week as the financial markets received mixed signals from the U.S economy that could have contributed to the unclear trend of precious metals. For next week, let’s break down the upcoming reports and events by regions:
The three main reports that will come out this week are: non-manufacturing PMI, trade balance, and jobless claims. Last week, the FOMC’s meeting didn’t offer any new insight regarding the FOMC’s next move. The speculations around whether the FOMC will taper QE3 in the next meeting will remain high. Until a decision will be made, the progress of the U.S economy could influence FOMC members, which will also likely to affect the direction of precious metals prices. If the upcoming reports will show some signs of progress, they may pull down gold and silver prices.
In China, several reports will be published next week including: trade balance, CPI, new loans, and industrial production. China is among the leading importer of commodities such as gold and oil. If China’s economy will show signs of progress, it could suggest the demand for gold will keep rising. Therefore, if the upcoming reports will show signs of progress, they could help pull gold and silver prices.
The ECB left policy unchanged and the Euro remained nearly unchanged during last week against the USD. If the Euro will resume its downward trend, it could adversely affect precious metals prices that tend to be strongly linked with the Euro. Several reports will come out including: French and German industrial production, ECB monthly bulletin. These reports could affect the Euro, which tends to be positively correlated with precious metals prices.
Australia, Japan and Canada
I have lumped together these countries together because their relations with gold and silver are mostly via their respective currencies. The Australian currency tumbled down last week perhaps on anticipation of the upcoming rate decision, in which many expect RBA will cut its rate to 2.5%. If this decision will come to fruition, it’s likely to keep the Aussie weak, which could also negatively affect bullion prices. In Japan the monetary policy meeting could also affect the yen, if BOJ will decide of any changes to its policy. In Canada, several reports will come out including trade balance and Ivey PMI. These reports could affect the Canadian dollar.
Finally, despite last month’s recovery of gold price, it didn’t pull up gold holdings of SPDR gold trust ETF that continues to fall: During July, the ETF’s gold holdings fell by 5.25% and by 32% during 2013 (up-to-date). Current gold holdings are at 918.641 tons. If the ETF’s gold holdings will keep falling, this could indicate the demand for gold as an investment will further diminishing.
My guess is that gold and silver won’t do much this week and might resume their slow descent.
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