During the previous week, gold and silver spiked. Due to last week’s rally silver price reached its highest level since mid-May. The price of gold is at its highest since the end of June. The recent rally may have stemmed, in part, from low trading volumes that allowed such a sharp rise in bullion prices. The strong demand for silver and gold in India and China may have also contributed to the recovery of precious metals. Finally, it’s less clear if the Fed will taper QE3 in September, which might be bringing more investors back to gold and silver. In any case, this rally is likely to keep relying on the future developments of the U.S economy and the Fed’s monetary policy. During last week, in the U.S, jobless claims fell by 15k to reach 320k; Philly Fed index tumbled down to 9.3 in August; the CPI inched up by 0.2% during July. Retail sales also edged up by only 0.2%. Finally, U.S housing starts and building permits slightly increased during July. These reports were slightly positive at best and mostly negative, which could have contributed to the rally of gold and silver. Will gold and silver continue their upward trend this week? Here is a short outlook for August 19th to August 23rd; this includes a fundamental analysis of the main events and publications that may affect precious metals markets. These include: China, France and Germany’s manufacturing PMI, Minutes of the FOMC meeting, U.S new and existing home sales, minutes of Reserve Bank of Australia policy meeting, Canada’s retail sales, Jackson Hall conference, and U.S. jobless claims.
The price of gold spiked by 4.47% last week; further, the average price reached $1,344.52 /t. oz which was 3.54% above last week’s average. Gold ended the week at $1,371.20 /t. oz.
During last week silver also jumped by 14.33%; moreover, the average weekly rate was $22.15/t oz, which was 11.46% above last week’s rate.
Herein is a short overview that shows the main publications and events that will unfold next week between August 19th and August 23rd and may affect precious metals.
For next week, let’s break down the upcoming reports and events by regions:
The minutes of the last FOMC meeting could have a significant effect on precious metals and US dollar. If the minutes will reveal any insight regarding the next FOMC meeting to be held in September, this could affect the direction of gold and silver prices. I remain skeptic as to whether the FOMC will slowdown its asset purchase program due to: The slowdown in growth of the job market, the low inflation, and the moderate sign of growth in other facets of the economy.
Besides the minutes of FOMC meeting, the main reports that will be published this week are: new and existing home sales and jobless claims. The upcoming reports could affect the direction of gold and silver prices via the speculations around the future steps of the FOMC. If these reports will exceed expectations and will keep showing progress it could raise the odds of tapering QE3, which may adversely affect gold and silver. Finally, if the US stock market will continue to dwindle, this trend is likely to push back investors towards gold and silver.
China and India
India and China will keep playing a role in the developments of gold and silver prices. If the demand for gold and silver in China and India will keep increasing, this could maintain the current levels of precious metals prices. The upcoming flash manufacturing PMI report could affect commodities prices. If the PMI will fall again, this could pressure down commodities prices. Finally, if the Indian Rupee will continue declining as it did in recent weeks this could curb the increase in demand for precious metals.
The situation in Europe has slightly improved with the positive GDP quarterly update. This week, the PMI reports will come out. If they will showing signs of progress, they could they could positively affect the Euro, which tends to be correlated with gold and silver.
Australia, Japan and Canada
These countries’ relations with gold and silver are mostly via their respective currencies. The Australian currency and Japanese yen slipped last week against the USD. If the Aussie and Japanese yen will keep falling they might also pull down precious metals prices. In Australia, the minutes of the monetary policy meeting could also affect the Aussie. In Japan, the trade balance report will be published. In Canada, core CPI and retail sales reports could affect the Canadian dollar.
Finally, gold holdings of SPDR gold trust ETF changed direction and for first time this year and bounced back: During last week, the ETF’s gold holdings rose by 0.46%. But during the month, the ETF was still down 1.3% and by 32.24% during 2013 (up-to-date). Current gold holdings are at 915.32 tons. If the ETF’s gold holdings will keep rising, this could indicate the demand for gold as an investment is growing.
I remain neutral of gold and silver. My guess is that gold and silver might continue their rally, but their overall trend will remain unclear.
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