During last week, gold and silver rose again. Their ongoing recovery resulted in gold reaching its highest level since early June; silver is at its highest since early May. Despite the recent rally of gold and silver, their recovery didn’t stem from the latest developments in the forex markets. The publication of the minutes of the previous FOMC meeting didn’t add more information behind the future move of the FOMC. Thus, the developments in the US are likely to keep influencing bullion investors. In the U.S, jobless claims changed direction and rose by 13k to reach 323k; existing home sales sharply increased in July, while new home sales plummeted. These reports didn’t paint a clear picture about the progress of the U.S economy, which might partly explain the low volatility of gold and silver during the week. Will gold and silver keep recovering this week? Here is a short forecast for August 26th to August 30th; this includes a fundamental analysis of the main publications that may affect bullion markets. These include: U.S core durable goods report, China manufacturing PMI, U.S consumer confidence, Canada’s GDP, U.S’s GDP second quarter estimate, U.S pending home sales, German retail sales, and U.S. jobless claims.
The price of gold increased by 1.74% last week; further, during last week, the average price reached $1,374.72 /t. oz which was 2.25% above last week’s average. Gold ended the week at $1,395 /t. oz.
Silver price also rose by 1.78%; moreover, the average weekly rate was $23.19/t oz, which was 4.74% above last week’s.
Herein is a short breakdown that presents the main publications and events that will unfold next week between August 26th and August 30th and may affect bullion prices.
For next week, let’s break down the upcoming reports and events according to the main economies:
Last week’s publication of the minutes of the last FOMC meeting didn’t do much to the prices of gold and silver as it didn’t offer any more information about the Fed’s future steps. Until the FOMC’s next meeting in September, the progress of the U.S economy could influence bullion investors. If the U.S economy will keep showing progress, it may raise the odds of the FOMC tapering QE3 this year and thus may pull down gold and silver prices. This week’s reports include consumer confidence report, GDP for the second quarter, core durable goods and jobless claims. If these reports will exceed expectations and will show progress it could raise the odds of tapering QE3, which may pull back down gold and silver. Finally, if the US stock market will keep recovering, this trend is likely to ward off investors from gold and silver.
The slow progress of the Euro Area may have slightly positively affected the Euro. This week, the following reports will come out: Monetary developments, EU employment, EU CPI, German retail sales and German employment situation reports. If they will showing signs of progress, they could they may positively affect the Euro, which tends to be linked with gold and silver.
China and India
In India, the weakening of the Indian Rupee along with the higher import taxes on gold are likely to further push down the demand for gold in this country. Conversely, China’s economy is showing signs of progress. The upcoming report regarding its manufacturing conditions could affect commodities prices. If the PMI will rise again, this could pressure up commodities prices including gold and silver.
Australia and Canada
These countries’ relations with bullion prices are mostly via their respective currencies. The Australian currency and Canadian dollar depreciated again last week against the USD. If the Aussie and Japanese yen will continue their downward trend, they might pull down precious metals prices. In Australia, the Private New Capital Expenditure report could also affect the Aussie. In Canada, the GDP report will come out and could affect the Canadian dollar.
Finally, gold holdings of SPDR gold trust ETF increased again for the second consecutive week: During last week, the ETF’s gold holdings rose by 0.53%. But during the month, the ETF was still down 0.78% and by 31.88% during 2013 (up-to-date). Current gold holdings are at 920.13 tons. If the ETF’s gold holdings will keep increasing, this could indicate the demand for gold as an investment is growing again.
I think gold and silver might keep its slow upward trend as long as the U.S economy isn’t showing much progress. But I remain neutral on gold and silver and until the next FOMC meeting their overall trend will remain unclear.
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