During last week, gold slightly fell while silver rallied. The market expectations for the next FOMC’s meeting keep gold and silver from forming a clear trend. Some analysts suspect the Fed will taper QE3 in September from $85 billion to $70 billion. Even in such an event, this decision’s effect might not be significant on gold and silver: QE3 had little positive effect on precious metals during 2013; thus, the negative effect might not be too severe over the coming months. Until then, the progress of U.S economy may keep moving gold and silver prices: Last week, the non-farm payroll report presented an increase of 169k in jobs – a bit lower than anticipated. This may have contributed to the rise of gold and silver on Friday. Will gold and silver rise this week? Here is a short forecast for September 9th to September 13th; this includes a fundamental analysis of the main publications that may affect bullion markets. These include: U.S retail sales, China’s new loans, U.S consumer sentiment, EU industrial production, China’s trade balance, U.S federal budget update, and U.S. jobless claims.
The price of gold declined 0.69% last week; moreover, the average price reached $1,390.03 /t. oz which was 1.27% above last week’s average rate. Gold ended the week at $1,386.2 /t. oz.
During the previous week, the price of silver increased by 1.59%; conversely, the average weekly price was $23.71/t oz, which was 1.72% above last week’s.
Herein is a short overview presenting the main publications and events that will unfold during September 9th to 13th and may affect precious metals prices.
For next week, let’s break down the forthcoming publications and events for each of the leading economies:
The FOMC’s meeting will take place during September 17-18; up to then, the progress of the U.S economy could affect precious metals prices. If the U.S economy keeps showing little progress, it may lower the odds of the FOMC tapering QE3 this year and thus may pull back up gold and silver. This week’s reports include retail sales, federal budget, consumer sentiment, PPI and jobless claims. If these reports don’t meet expectations, they may lower the odds of tapering QE3, which may positively affect gold and silver. The budget talks of U.S policymakers have started and if they decide to reduce the budget, it could also affect the USD and bullion prices. Finally, if the US stock market continues to rally, this trend is likely to steer investors away from precious metals.
Last week, the ECB decided to keep its monetary policy unchanged. The slightly negative sentiment of Draghi towards the progress of the EU may have contributed to the decline of the Euro against the USD. The upcoming EU events including EU industrial production, German bond auction, French industrial production and Euro-Group Summits, could affect the Euro, which tends to be correlated with gold and silver.
China and India
In China, several publications will come out including trade balance, new loans, CPI and industrial production. These reports could suggest the progress of the Chinese economy and by extension the Chinese demand for commodities; if these reports show ongoing recovery in the Chinese economy, they may affect commodities prices;
In India, the Indian Rupee slightly rallied against the USD. But in total the Rupee lost more than 6.8% of its value in the past month. If the Rupee resumes its downward trend, this could pressure down the prices of gold and silver.
Australia, Japan and Canada
These countries’ relations with bullion prices are mostly via their respective currencies. In the past month, however, the correlations among these currencies and precious metals have weakened. In any case, any unexpected changes to these currencies may, in turn, affect bullion prices.
Finally, gold holdings of SPDR gold trust ETF slightly fell for the first time in the past four weeks. During the previous week, the ETF’s gold holdings declined by 0.2%. The ETF was also down by 31.95% since the beginning of 2013 (up-to-date). Current gold holdings are at 919.22 tons. If the ETF’s gold holdings keep falling, this will signal that the demand for gold as an investment is diminishing.
I think gold and silver might keep rising, if U.S reports including retail sales and jobless claims reports don’t meet expectations. Finally, the volatility might start to pick up the coming weeks as the speculations around the FOMC’s next move will become clearer. Until then the progress of the US economy and in other leading economies such as China, EU and India could affect the directions of gold and silver.
For further reading:
- Gold and Silver Outlook for September
- Weekly Outlook of Financial Markets for September 9-13
- Do Gold and Silver protect you from Inflation?
- Is the Golden Era of Gold Over?
- Will Gold Recover from its Recent Fall?
- Gold and Silver Yearly Outlook For 2013