The prices of gold and silver rallied during last week. The latest FOMC meeting ended with Bernanke keeping the monetary policy unchanged even though many had expected the Fed will start tapering its asset purchase program. As a result gold and silver spiked by 4.73% and 8%, respectively. On Friday, however, both precious metals changed direction and plunged by 2.7% for gold and 5.9% for silver. In the U.S several reports came out and showed mostly progress: in the U.S jobless claims rose by 15k to reach 309k; existing home sales spiked by 6.5% to reach an annual rate of 5.39 million in July; Philly Fed index sharply rose in September from 9.3 to 22.3 – this signal the U.S manufacturing conditions are progressing at the faster pace. In India, the demand is falling, which may have also curbed down the rally of precious metals during the week. Will gold and silver resume its downward trend this week? Here is a short forecast for September 23rd to September 27th including: U.S core durable goods, China manufacturing PMI, ECB president speech, U.S consumer confidence, U.S’s GDP, Germany’s manufacturing PMI, U.S pending and new home sales, and U.S. jobless claims.
The price of gold rose by 1.85% last week; further, during last week, the average price reached $1,327.40 /t. oz which was 1.71% below last week’s average. Gold ended the week at $1,332.60 /t. oz.
Moreover, silver price increased by 0.94%; conversely, the average weekly rate was $22.08/t oz, which was 2.82% below last week’s rate.
Herein is a short overview showing the main reports and events that will take place during September 23rd to 27th and may affect precious metals prices. Further, the video below shows a breakdown of the events that will come into play during next week any may affect the direction of precious metals.
For next week, let’s breakdown the upcoming publications and events according to the leading economies:
Following last week’s FOMC meeting, the high volatility of gold and silver is likely to drop, which will result in smaller changes in the daily percent changes compared to last week. The rally of gold and silver didn’t last long and could suggest the recovery of precious metals won’t return due to the non-tapering FOMC decision.
Besides the FOMC’s decision and its aftermath, several other reports could affect precious metals prices. This week’s reports include core durable goods, consumer confidence, consumer sentiment, housing data (new and pending home sales), and jobless claims. If these reports meet expectations, they may adversely affect gold and silver. Finally, if the US stock market continues to rally, this trend is likely to curb the demand of precious metals.
The Euro bounced back last week following the FOMC’s decision. Nonetheless, the correlation between precious metals and Euro/USD has weakened in recent months. This could suggest the Euro/USD has had little effect on gold and silver rates. The upcoming EU events and reports including EU manufacturing PMI, German business climate, Draghi’s testimony could affect the Euro, which, in turn, could slightly affect precious metals.
China and India
In India, gold imports could fall during this year, which may also curb down the rally of gold prices. According to one report, India’s gold imports may fall by 11% (y-o-y). Conversely, the Rupee gained more than 8.9% of its value in the recent month. If the Rupee continues its upward trend, this could pull up gold and silver prices.
In China, the ongoing recovery of the economy along with the strong demand for gold and silver are likely to keep the prices of gold and silver from further falling. The upcoming manufacturing PMI report could signal the progress of China’s economy.
Finally, gold holdings of SPDR gold trust ETF slipped again for the third consecutive week. During the month, the ETF’s gold holdings fell by 1.18%. The ETF was also down by 32.62% since the beginning of 2013 (up-to-date). Current gold holdings are at 910.19 tons. If the ETF’s gold holdings keep falling, this will signal that the demand for gold as an investment is weakening.
I guess gold and silver will resume its downward trend. The FOMC’s decision to keep policy unchanged led to a very prompt reaction, in which bullion rallied. But this reaction didn’t last long and was followed by a sharp correction. This suggests gold and silver won’t resume their rally due to the FOMC’s non-tapering decision. This leaves the U.S economic developments, demand for gold and silver in Asia and changes in forex market. If the U.S economy continues to progress, bullion prices may resume their fall. The potential weaker demand for gold in India could pull down gold and silver prices. Finally, the forex markets are playing a smaller role in the progress of precious metals.
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