Gold and Silver Outlook for December 28-31

The last week of the year is upon us. And this week, much like last one, will be a short one with low trading volume. This could result in lower volatility, albeit in the past volatility tended to pick up. Last week, gold and silver prices slightly bounced back following the rate hike by the FOMC. Precious metals’ bounce back coincided with the weakening of the USD against the Euro, Yen and Aussie dollar. Considering the short week, low trading volume and very few economic reports will be published, bullion prices aren’t likely to move much. Some of the reports that will be released this week include: U.S. consumer confidence, EU M3, U.S. pending home sales, Japan’s retail sales, and China’s manufacturing PMI.

This week will not only be a short one, but it will also be light on trading considering everyone is heading toward the holiday festivities. This will also likely to include gold and silver. These precious metals are likely to follow the lead – this week more than in the past – from the USD. If the U.S. dollar keeps its recent downward trend, this could also result in a modest recovery of gold and silver. It’s worth noting that it’s not clear cut that volatility will wind down on the last week of the year: Case in point, back at the end of 2014, the volatility in precious metals prices – as measured by the absolute average percent change in daily prices – was higher than during the first week of 2015. Conversely, at the end of 2013, volatility was lower than at the start of 2014.

voliatlity and gold

Source: Bloomberg

Nonetheless, in both cases, gold and silver prices moved less on a weekly scale during the last week of the year than on the first week of the year. In other words, we could see a lot of movement but no real trend forming.

For now, the market hasn’t changed much its outlook about the chances of future rate hikes in 2016: According to Fed-watch the implied probability for a hike may in March is 55%; and 76% in June 2016 – only modest gains from the end of the previous week.

Although gold and silver prices rallied last week, the same cannot be said of the demand for bullion ETFs: By the end of last week, gold holding of the gold ETF SPDR Gold Trust (GLD) fell for the first by 0.6%, week on week, to 644.75 tons of gold. And silver holdings for the silver ETF iShares Silver Trust (SLV) decreased again by 1% to 318.8 million ounces – the lowest level this month.

Bottom line

Don’t expect much to happen this week in the financial markets. Precious metals prices could still see some modest gains, as they did last week, providing the USD will continue to slowly depreciate against the leading currencies – perhaps a correction to the buildup to the FOMC rate hike decision. While it was hawkish, people are still not too convinced the Fed will move forward in raising rates next year. And low rates along with global uncertainty equals gold and silver prices remaining put in the coming months.

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2 comments for “Gold and Silver Outlook for December 28-31

  1. Brian
    December 25, 2015 at 6:47 pm

    What about an outlook for the new year? 😉 Gold seems oversold on the long term, so I guess a bull trend might appear there soon. What do you think?

    • December 27, 2015 at 5:41 am

      For 2016 that’s a whole different story. Gold and silver lost their shine in recent years; even though the supply for physical PM is likely to decline, which could boost prices. The other possible upside is global economic woes, which could also push, even if for a short term, demand for PM. But I still think the general direction for prices will be, much like this year, slow downward slop on account of higher LT rates, stronger USD and low inflation exp.

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